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The government spending multiplier in the Heterogeneous Agent New Keynesian model

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  • Kopiec, Paweł

Abstract

This paper provides an analytical decomposition of the fiscal multiplier in the Heterogeneous Agent New Keynesian model. The derived expression consists of interpretable, model-based channels through which private consumption propagates government spending shocks. The calibrated model is used to estimate the magnitude of multipliers and their structure under alternative fiscal and monetary rules. The derived formula is compared to its representative agent limit to articulate the role of household heterogeneity in the transmission of government spending shocks. A two-agent version of the model is investigated to explore the consequences of cyclical inequality for the propagation of fiscal expenditures.

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  • Kopiec, Paweł, 2022. "The government spending multiplier in the Heterogeneous Agent New Keynesian model," European Economic Review, Elsevier, vol. 145(C).
    • Handle: RePEc:eee:eecrev:v:145:y:2022:i:c:s0014292122000617
    DOI: 10.1016/j.euroecorev.2022.104125
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    More about this item

    Keywords

    Heterogeneous Agents; Fiscal stimulus;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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