Arbeitspapier
Inequality and the Zero Lower Bound
This paper studies how household inequality shapes the effects of the zero lower bound (ZLB) on nominal interest rates on aggregate dynamics. To do so, we consider a heterogeneous agent New Keynesian (HANK) model with an occasionally binding ZLB and solve for its fully nonlinear stochastic equilibrium using a novel neural network algorithm. In this setting, changes in the monetary policy stance influence households' precautionary savings by altering the frequency of ZLB events. As a result, the model features monetary policy non-neutrality in the long run. The degree of long-run non-neutrality, i.e., by how much monetary policy shifts real rates in the ergodic distribution of the model, can be substantial when we combine low inflation targets and high levels of wealth inequality.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 10471
- Classification
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Wirtschaft
Personal Income, Wealth, and Their Distributions
General Aggregative Models: Keynes; Keynesian; Post-Keynesian
Macroeconomics: Consumption; Saving; Wealth
Price Level; Inflation; Deflation
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Central Banks and Their Policies
- Subject
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heterogeneous agents
HANK models
neural networks
non-linear dynamics
- Event
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Geistige Schöpfung
- (who)
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Fernández-Villaverde, Jesús
Marbet, Joël
Nuño, Galo
Rachedi, Omar
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2023
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Fernández-Villaverde, Jesús
- Marbet, Joël
- Nuño, Galo
- Rachedi, Omar
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2023
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