Code for: Optimal Monetary Policy According to HANK

Principal Investigator(s): View help for Principal Investigator(s) Sushant ACHARYA, Bank of Canada; Edouard CHALLE, European University Institute; Keshav DOGRA, Federal Reserve Bank of New York

Version: View help for Version V1

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README.pdf	application/pdf	196.5 KB	02/22/2023 09:51:AM
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makeecPERS.m	text/x-matlab	1.5 KB	05/26/2022 02:36:PM
optdynamicsHTM.m	text/x-matlab	5.5 KB	02/21/2023 10:39:AM
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optdynamics_iid.m	text/x-matlab	5.3 KB	06/02/2022 10:45:AM
optdynamics_profits.m	text/x-matlab	4 KB	02/22/2023 09:50:AM

Project Citation:

ACHARYA, Sushant, CHALLE, Edouard, and DOGRA, Keshav. Code for: Optimal Monetary Policy According to HANK. Nashville, TN: American Economic Association [publisher], 2023. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-06-19. https://doi.org/10.3886/E184261V1

Project Description

Summary: We study optimal monetary policy in an analytically tractable Heterogeneous Agent New Keynesian model with rich cross-sectional heterogeneity. Optimal policy differs from a Representative Agent bench-mark because monetary policy can affect consumption inequality, by stabilizing consumption risk arising from both idiosyncratic shocks and unequal exposures to aggregate shocks. The tradeoff between consumption inequality, productive efficiency and price stability is summarized in a simple linear-quadratic problem yielding interpretable target criteria. Stabilizing consumption inequality requires putting some weight on stabilizing the level of output, and correspondingly reducing the weights on the output gap and price level relative to the representative agent benchmark.

Funding Sources: Agence Nationale pour la Recherche (ANR-20-CE26-0018-01)

Scope of Project

Subject Terms: New Keynesian Model; Incomplete Markets; Optimal Monetary Policy

JEL Classification:
      E21 Macroeconomics: Consumption; Saving; Wealth
      E30 Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
      E52 Monetary Policy
      E62 Fiscal Policy
      E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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Published Versions

V1 [2023-06-19]

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