Simpler models can capture dynamics of Hank framework – NBER paper

Heterogeneity can be “irrelevant” to determining output in some situations, authors find


Simpler models are able to create a good approximation of heterogeneous agent New Keynesian (Hank) models, new research finds.

Hank models explore how agents with different levels of wealth are able to respond to uninsurable income shocks. Those with some assets are better able to smooth their consumption, so the level of inequality affects the aggregate impact of policy decisions.

Authors Davide Debortoli and Jordi Galí argue approaches with two agents (“Tank” models), rather than a full

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