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Unconventional Monetary Policy According to HANK

Author

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  • Eric R. Sims
  • Jing Cynthia Wu
  • Ji Zhang

Abstract

This paper studies the implications of household heterogeneity for the effectiveness of quantitative easing (QE). We consider a heterogeneous agent New Keynesian (HANK) model with uninsurable household income risk. Financial intermediaries are subject to an endogenous leverage constraint that allows QE to matter. We find that macro aggregates react very similarly to a QE shock in the HANK model compared to a representative agent (RANK) version of the model. This finding is robust across different micro- and macro- distributions of wealth.

Suggested Citation

  • Eric R. Sims & Jing Cynthia Wu & Ji Zhang, 2022. "Unconventional Monetary Policy According to HANK," NBER Working Papers 30329, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30329
    Note: EFG ME
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    Cited by:

    1. Jing Cynthia Wu & Yinxi Xie & Ji Zhang, 2024. "The Role of International Financial Integration in Monetary Policy Transmission," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 944-990, September.
    2. Cantore, Cristiano & Meichtry, Pascal, 2024. "Unwinding quantitative easing: State dependency and household heterogeneity," European Economic Review, Elsevier, vol. 170(C).
    3. Goto, Eiji, 2023. "Industry effects of unconventional monetary policy, within and across countries," Journal of International Money and Finance, Elsevier, vol. 136(C).
    4. Dusan Stojanovic, 2023. "Quantitative Easing in the Euro Area: Implications for Income and Wealth Inequality," CERGE-EI Working Papers wp760, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. Hohberger, Stefan & Ratto, Marco & Vogel, Lukas, 2023. "The macroeconomic effects of unconventional monetary policy: Comparing euro area and US models with shadow rates," Economic Modelling, Elsevier, vol. 127(C).
    6. Patrick Gruning & Andrejs Zlobins, 2023. "Quantitative Tightening: Lessons from the US and Potential Implications for the EA," Working Papers 2023/09, Latvijas Banka.
    7. Gerke, Rafael & Giesen, Sebastian & Lozej, Matija & Röttger, Joost, 2024. "On household labour supply in sticky-wage HANK models," Discussion Papers 01/2024, Deutsche Bundesbank.
    8. Harrison, Richard, 2024. "Optimal quantitative easing and tightening," Bank of England working papers 1063, Bank of England.

    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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