Heterogeneity and aggregate fluctuations: insights from TANK models

We analyze the merits and limitations of simple tractable New Keynesian models (RANK [representative agent New Keynesian] and TANK [two-agent New Keynesian]) in accounting for the aggregate predictions of heterogeneous agent New Keynesian models (HANK). By means of comparison of a number of nested H...

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Autores: Debortoli, Davide, Galí, Jordi, 1961-
Formato: artículo
Estado:Versión publicada
Fecha de publicación:2025
País:España
Recursos:Universitat Pompeu Fabra
Repositorio:Repositorio Digital de la UPF
OAI Identifier:oai:repositori.upf.edu:10230/70971
Acesso em linha:http://hdl.handle.net/10230/70971
http://dx.doi.org/10.1086/735272
Access Level:acceso embargado
Palavra-chave:Monetary policy
Idiosyncratic income risk
Incomplete markets: Representative household
New Keynesian model
HANK models
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spelling Heterogeneity and aggregate fluctuations: insights from TANK modelsDebortoli, DavideGalí, Jordi, 1961-Monetary policyIdiosyncratic income riskIncomplete markets: Representative householdNew Keynesian modelHANK modelsWe analyze the merits and limitations of simple tractable New Keynesian models (RANK [representative agent New Keynesian] and TANK [two-agent New Keynesian]) in accounting for the aggregate predictions of heterogeneous agent New Keynesian models (HANK). By means of comparison of a number of nested HANK models, we investigate the role played by (1) idiosyncratic income risk, (2) a binding borrowing constraint, and (3) a portfolio choice between liquid and illiquid assets. We argue that the effects of household heterogeneity can be largely understood by looking at the differential behavior of two types of households: hand-to-mouth and unconstrained. We find that a suitably specified and calibrated TANK model (which abstracts from idiosyncratic income risk) can capture reasonably well the aggregate implications of household heterogeneity and the main channels through which it operates. That ability increases in the presence of a policy rule that emphasizes inflation stability. In the limiting case of a strict inflation-targeting policy, heterogeneity becomes irrelevant for the determination of aggregate output.Galí acknowledges the financial support from the European Research Council under the European Union's Horizon 2020 research and innovation program (Grant 882332-HEMPEF). Both authors acknowledge financial support from the Agencia Estatal de Investigación (AEI) through the Severo Ochoa Programme for Centres of Excellence in R&D (Barcelona School of Economics CEX2019-000915-S) and grant PID2020-116268GB-I00 (Debortoli) and from the Generalitat de Catalunya through the CERCA Programme.University of Chicago Press202520252025infoinfoinfo:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdfapplication/pdfhttp://hdl.handle.net/10230/70971http://dx.doi.org/10.1086/735272reponame:Repositorio Digital de la UPFinstname:Universitat Pompeu FabraInglésNBER Macroeconomics Annual. 2025;39(1):307-357http://hdl.handle.net/10230/59524info:eu-repo/grantAgreement/EC/H2020/882332info:eu-repo/grantAgreement/ES/2PE/PID2020-116268GB-I00© University of Chicago Press http://www.journals.uchicago.edu/ET/home.html If a shorter embargo period is required by government or funding body mandate, only the final accepted version of the manuscript may be released. Can I include my published article in an official institutional repository? You may place your published article in a non-commercial data repository maintained by an institution of which you are a member provided you meet all relevant conditions described in these Guidelines and in the editorial office's communications with you. An institutional repository as distinguished from your personal or departmental web site is designed for the systematic storage retrieval and delivery of scholarly material. Your article may be made publicly available after the appropriate embargo period* has been observed. You are responsible for informing the manager of the institutional repository of the embargo period that must be observed. Please also note the comments elsewhere in these Guidelines regarding prior publication and anonymous peer review and the use of copyrighted material in your article. *The embargo period is 3 years after publication for Publications of the Astronomical Society of the Pacific and 12 months for all other journals.info:eu-repo/semantics/embargoedAccessoai:repositori.upf.edu:10230/709712026-06-12T07:21:37Z
dc.title.none.fl_str_mv Heterogeneity and aggregate fluctuations: insights from TANK models
title Heterogeneity and aggregate fluctuations: insights from TANK models
spellingShingle Heterogeneity and aggregate fluctuations: insights from TANK models
Debortoli, Davide
Monetary policy
Idiosyncratic income risk
Incomplete markets: Representative household
New Keynesian model
HANK models
title_short Heterogeneity and aggregate fluctuations: insights from TANK models
title_full Heterogeneity and aggregate fluctuations: insights from TANK models
title_fullStr Heterogeneity and aggregate fluctuations: insights from TANK models
title_full_unstemmed Heterogeneity and aggregate fluctuations: insights from TANK models
title_sort Heterogeneity and aggregate fluctuations: insights from TANK models
dc.creator.none.fl_str_mv Debortoli, Davide
Galí, Jordi, 1961-
author Debortoli, Davide
author_facet Debortoli, Davide
Galí, Jordi, 1961-
author_role author
author2 Galí, Jordi, 1961-
author2_role author
dc.subject.none.fl_str_mv Monetary policy
Idiosyncratic income risk
Incomplete markets: Representative household
New Keynesian model
HANK models
topic Monetary policy
Idiosyncratic income risk
Incomplete markets: Representative household
New Keynesian model
HANK models
description We analyze the merits and limitations of simple tractable New Keynesian models (RANK [representative agent New Keynesian] and TANK [two-agent New Keynesian]) in accounting for the aggregate predictions of heterogeneous agent New Keynesian models (HANK). By means of comparison of a number of nested HANK models, we investigate the role played by (1) idiosyncratic income risk, (2) a binding borrowing constraint, and (3) a portfolio choice between liquid and illiquid assets. We argue that the effects of household heterogeneity can be largely understood by looking at the differential behavior of two types of households: hand-to-mouth and unconstrained. We find that a suitably specified and calibrated TANK model (which abstracts from idiosyncratic income risk) can capture reasonably well the aggregate implications of household heterogeneity and the main channels through which it operates. That ability increases in the presence of a policy rule that emphasizes inflation stability. In the limiting case of a strict inflation-targeting policy, heterogeneity becomes irrelevant for the determination of aggregate output.
publishDate 2025
dc.date.none.fl_str_mv 2025
2025
2025
info
info
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/10230/70971
http://dx.doi.org/10.1086/735272
url http://hdl.handle.net/10230/70971
http://dx.doi.org/10.1086/735272
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv NBER Macroeconomics Annual. 2025;39(1):307-357
http://hdl.handle.net/10230/59524
info:eu-repo/grantAgreement/EC/H2020/882332
info:eu-repo/grantAgreement/ES/2PE/PID2020-116268GB-I00
dc.rights.none.fl_str_mv info:eu-repo/semantics/embargoedAccess
eu_rights_str_mv embargoedAccess
dc.format.none.fl_str_mv application/pdf
application/pdf
dc.publisher.none.fl_str_mv University of Chicago Press
publisher.none.fl_str_mv University of Chicago Press
dc.source.none.fl_str_mv reponame:Repositorio Digital de la UPF
instname:Universitat Pompeu Fabra
instname_str Universitat Pompeu Fabra
reponame_str Repositorio Digital de la UPF
collection Repositorio Digital de la UPF
repository.name.fl_str_mv
repository.mail.fl_str_mv
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