Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297351 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2911
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We propose a novel methodology for solving Heterogeneous Agents New Keynesian (HANK) models with aggregate uncertainty and the Zero Lower Bound (ZLB) on nominal interest rates. Our efficient solution strategy combines the sequence-state Jacobian methodology in Auclert et al. (2021) with a tractable structure for aggregate uncertainty by means of a two-regimes shock structure. We apply the method to a simple HANK model to show that: 1) in the presence of aggregate non-linearities such as the ZLB, a dichotomy emerges between the aggregate impulse responses under aggregate uncertainty against the deterministic case; 2) aggregate uncertainty amplifies downturns at the ZLB, and household heterogeneity increases the strength of this amplification; 3) the effects of forward guidance are stronger when there is aggregate uncertainty.
Subjects: 
Monetary Policy
New-Keynesian Models
Liquidity Traps
Zero Lower Bound
Computational Methods
JEL: 
D14
E44
E52
E58
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6391-6
Document Type: 
Working Paper

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