In this paper I develop a New Keynesian dynamic stochastic general equilibrium model which features three different types of representative agents (THRANK): the poor hand-to- mouth, the wealthy hand-to-mouth and the non-hand-to mouth households. Compared to a full-scale HANK model, this model is...

Macroeconomic models often invoke consumption "habits" to explain the substantial persistence of macroeconomic consumption growth. But a large literature has found no evidence of habits in the microeconomic datasets that measure the behavior of individual households. We show that the apparent...

We use information on monthly wage increases set by collective agreements in Italy and exploit their variation across sectors and over time in order to examine how household consumption responds to different types of positive income shocks (regular tranches versus lump-sum payments). Focusing on...

In this paper we investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. We make use of a new database of models designed for such investigations. We focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and...

We propose a theoretical framework to reconcile episodes of V-shaped and L-shaped recovery, en- compassing the behaviour of the U.S. economy before and after the Great Recession. In a DSGE model with endogenous growth, negative demand shocks destroy productive capacity, moving GDP to a lower...

This paper analyzes the link between monetary policy and capital misallocation in a New Keynesian model with heterogeneous firms and financial frictions. In the model, firms with a high return to capital increase their investment more strongly in response to a monetary policy expansion, thus...

We revisit recent evidence on how monetary policy affects output and prices in the U.S. and in the euro area. The response patterns to a shift in monetary policy are similar in most respects, but differ noticeably as to the composition of output changes. In the euro area investment is the...

Based on the householdsu0092 utility maximisation, a closed form approximation of the consumption function is derived and the deep parameters of the consumption function are estimated using aggregate euro area data. The novel element in our approach is the parameterisation of the information...

There is already a small literature emphasising the empirical failure of the New Keynesian IS curve, but it is not yet known if this failure reflects empirical problems associated with small samples or is rather a structural weakness of the underlying model. To address this question, in this...

This paper develops a small-scale DSGE model which embeds a demographic structure within a monetary policy framework. We extend the tractable, though non-monetary overlapping-generations model of Gertler (1999) and present a small synthesis model which combines the set-up of Gertler with a...