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A Behavioral Heterogeneous Agent New Keynesian Model

Author

Listed:
  • Oliver Pfäuti

  • Fabian Seyrich

Abstract

We propose a behavioral heterogeneous agent New Keynesian model in which monetary policy is amplified through indirect general equilibrium effects, fiscal multipliers can be larger than one and which delivers empirically-realistic intertemporal marginal propensities to consume. Simultaneously, the model resolves the forward guidance puzzle, remains stable at the effective lower bound and determinate under an interest-rate peg. The model is analytically tractable and nests a wide range of existing models as special cases, none of which can produce all the listed features within one model. We extend our model and derive an equivalence result of models featuring bounded rationality and models featuring incomplete information and learning. This extended model generates hump-shaped responses of aggregate variables and a novel behavioral amplification channel that is absent in existing HANK models.

Suggested Citation

  • Oliver Pfäuti & Fabian Seyrich, 2022. "A Behavioral Heterogeneous Agent New Keynesian Model," CRC TR 224 Discussion Paper Series crctr224_2022_334, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2022_334
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp334
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    Cited by:

    1. Benchimol, Jonathan & Bounader, Lahcen & Dotta, Mario, 2025. "Estimating Behavioral Inattention," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    2. Agustín Arias & Benjamín García & Ignacio Rojas, 2023. "Forward Guidance: Estimating a Behavioral DSGE Model with System Priors," Working Papers Central Bank of Chile 994, Central Bank of Chile.
    3. Schnorpfeil, Philip & Weber, Michael & Hackethal, Andreas, 2023. "Households' response to the wealth effects of inflation," CEPR Discussion Papers 18440, C.E.P.R. Discussion Papers.
    4. Dobrew, Michael & Gerke, Rafael & Giesen, Sebastian & Röttger, Joost, 2025. "Make-up strategies with incomplete markets and bounded rationality," European Economic Review, Elsevier, vol. 173(C).
    5. Roulleau-Pasdeloup, Jordan, 2023. "Analyzing Linear DSGE models: the Method of Undetermined Markov States," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    6. Adrien Auclert & Matthew Rognlie & Ludwig Straub, 2024. "The Intertemporal Keynesian Cross," Journal of Political Economy, University of Chicago Press, vol. 132(12), pages 4068-4121.
    7. Ida, Daisuke & Kaminoyama, Kenichi, 2025. "Effect of a cost channel on monetary policy transmission in a behavioral new Keynesian model," Macroeconomic Dynamics, Cambridge University Press, vol. 29, pages 1-1, January.
    8. Luzie Thiel, 2023. "Monetary Policy and Inequality: A Two-way Relation," MAGKS Papers on Economics 202304, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Mirela Miescu, 2022. "Forward guidance shocks," Working Papers 352591340, Lancaster University Management School, Economics Department.

    More about this item

    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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