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The Regional Keynesian Cross

Author

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  • Bellifemine, Marco
  • Couturier, Adrien
  • Jamilov, Rustam

Abstract

We study how regional heterogeneity shapes the aggregate transmission of monetary policy and its distributional implications across space. We build a multi-region Heterogeneous-Agent New Keynesian model with 3,140 U.S. counties and cross-county differences in (i) intertemporal Marginal Propensities to Consume (MPCs) and (ii) non-tradable employment shares. We analytically characterize the nationwide consumption response to monetary policy in terms of the joint distribution of (i) and (ii). Using U.S. and Italian micro-data, we construct novel empirical measures of regional MPCs to validate our theory. Quantitatively, geographic heterogeneity leads to large distributional consequences of monetary policy across space and can sizably amplify its aggregate effects.

Suggested Citation

  • Bellifemine, Marco & Couturier, Adrien & Jamilov, Rustam, 2026. "The Regional Keynesian Cross," CEPR Discussion Papers 21076, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21076
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    Keywords

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    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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