Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283325 
Year of Publication: 
2021
Series/Report no.: 
Technical Paper No. 02/2021
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
This paper provides a comparison of monetary policy rules with make-up and/or asymmetric elements for a heterogeneous agent New Keynesian (HANK) model. The model features incomplete financial markets, nominal price and wage rigidities, rational expectations, an occasionally binding effective lower bound (ELB) on the short-term nominal interest rate as well as aggregate demand and cost-push shocks. Simulations show that symmetric policy rules with make-up elements can substantially lower the downward inflation bias induced by the ELB and reduce macroeconomic volatility. Asymmetric policy rules can address the downward inflation bias as well but lead to a substantial overshooting of the inflation target if they also feature make-up elements. The predictions of the HANK model for the considered policy rules are close to those obtained for a corresponding (representative agent) model version with complete markets.
Subjects: 
Monetary Policy
HANK
Household Heterogeneity
Effective Lower Bound
Make-Up Strategies
Asymmetric Policy Rules
Inequality
JEL: 
D31
E21
E31
E52
E58
J31
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.