DP14279 Micro Jumps, Macro Humps: Monetary Policy and Business Cycles in an Estimated HANK Model
|Author(s):||Adrien Auclert, Matthew Rognlie, Ludwig Straub|
|Publication Date:||January 2020|
|Keyword(s):||estimation, HANK, investment|
|JEL(s):||E21, E22, E23, E32, E43, E52|
|Programme Areas:||Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14279|
We estimate a Heterogeneous-Agent New Keynesian model with sticky household expectations that matches existing microeconomic evidence on marginal propensities to consume *and* macroeconomic evidence on the impulse response to a monetary policy shock. Our estimated model uncovers a central role for investment in the transmission mechanism of monetary policy, as high MPCs amplify the investment response in the data. This force also generates a procyclical response of consumption to investment shocks, leading our model to infer a central role for these shocks as a source of business cycles.