Micro Jumps, Macro Humps: Monetary Policy and Business Cycles in an Estimated HANK Model

Adrien Auclert, Matthew Rognlie and Ludwig Straub

No 14279, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Hank; Estimation; investment (search for similar items in EconPapers)
JEL-codes: E21 E22 E23 E32 E43 E52 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (91)

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Related works:
Working Paper: Micro Jumps, Macro Humps: Monetary Policy and Business Cycles in an Estimated HANK Model (2020)
Working Paper: Micro Jumps, Macro Humps: Monetary Policy and Business Cycles in an Estimated HANK Model (2020)
Working Paper: Micro Jumps, Macro Humps: monetary policy and business cycles in an estimated HANK model (2019)
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