Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273327 
Year of Publication: 
2023
Series/Report no.: 
DIW Discussion Papers No. 2044
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
How does a monetary union alter the impact of business cycle shocks at the household level? We develop a Heterogeneous Agent New Keynesian model of two countries (HANK2) and show in closed form that a monetary union shifts the adjustment to a shock horizontally - across countries - within the brackets of the union-wide wealth distribution rather than vertically - that is, across the brackets of the union-wide wealth distribution. Calibrating the model to the euro area reveals that a monetary union alters the impact of shocks most strongly in the tails of the wealth distribution but leaves the middle class almost unaffected.
Subjects: 
HANK2
OCA theory
Two-country model
monetary union
spillovers
monetary policy
heterogeneity
inequality
households
JEL: 
F45
E52
D31
Document Type: 
Working Paper

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