Researchers explore link between rates and consumption in new model
Paper constructs heterogeneous agent New Keynesian model
A working paper published by the European Central Bank (ECB) offers a new assessment of the importance of direct and indirect channels through which interest rates effect household consumption.
In Monetary policy according to HANK, Greg Kaplan, Benjamin Moll and Giovanni Violante examine the transmission mechanism of monetary policy for household consumption in a heterogeneous agent New Keynesian (HANK) model.
In the model, monetary policy affects aggregate consumption "primarily through
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