Paper lays groundwork for Canadian ‘Hank’ model

Bank of Canada, Ottawa
The Bank of Canada
Photo: Matthew Liteplo Photography

An economist at the Bank of Canada has started developing a heterogeneous-agent New Keynesian (Hank) model of the Canadian economy.

In a staff discussion paper, Iskander Karibzhanov estimates the Canadian “earnings process”. This is essential to Hank models, which derive their results from heterogeneity among households, he notes.

Karibzhanov finds the distribution of earnings shocks in Canada is “leptokurtic”, meaning it is “characterised by large, infrequent shocks rather than small but

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