Unconventional Monetary Policy According to HANK

Eric R. Sims; Jing Cynthia Wu; Ji Zhang

doi:10.3386/w30329

Unconventional Monetary Policy According to HANK

Eric R. Sims, Jing Cynthia Wu & Ji Zhang

Working Paper 30329

DOI 10.3386/w30329

Issue Date August 2022

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.

We are grateful to Drew Creal, Soroush Ghazi, Jasmine Xiao, as well as seminar and conference participants at NBER Summer Institute Monetary Economics Meeting, Penn State University, Tsinghua University, the University of Alabama, 2022 Renmin University of China School of Finance Workshop, and Marquette University for helpful comments. Sims and Wu acknowledge support from the National Science Foundation under Grant No. SES-1949107. Ji acknowledges support from the National Natural Science Foundation of China (No.72003102). Correspondence: esims1@nd.edu, cynthia.wu@nd.edu, zhangji@pbcsf.tsinghua.edu.cn. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
MARC RIS BibTeΧ

Unconventional Monetary Policy According to HANK

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