Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296350 
Year of Publication: 
2023
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 14 [Issue:] 3 [Year:] 2023 [Pages:] 799-816
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
We use an analytically tractable heterogeneous-agent (HANK) version of the standard New Keynesian model to show how the size of fiscal multipliers depends on (i) the distribution of factor incomes, and (ii) the source of nominal rigidities. With sticky prices but flexible wages, the standard representative-agent (RANK) model predicts large multipliers because profits fall after a fiscal stimulus and the resulting negative income effect makes the representative worker work harder. Our HANK model, where workers do not own stock, and thus do not receive profit income, predicts smaller fiscal multipliers. In fact, they are smaller with sticky prices than with flexible prices. When wages are the source of nominal rigidity, in contrast, fiscal multipliers are close to one, independently of income heterogeneity and price stickiness.
Subjects: 
Fiscal policy
heterogeneous agents
new Keynesian model
JEL: 
E32
E62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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