Abstract:  This paper introduces a decomposition approach for analyzing the responses of macroeconomic variables to aggregate shocks in heterogeneous-agent New Keynesian (HANK) models. The approach decomposes the responses into RANK and redistribution effects. The RANK effects capture the responses of a (constructed) representative agent, while the redistribution effects capture the responses of the heterogeneous-agent model to a transfer scheme among agents. The redistribution effects are further decomposed into income exposure, interest rate exposure, tax exposure, asset price, and liquidity channels. I apply this approach to monetary policy shocks and quantitatively measure the contribution of each channel to the deviation of HANK from RANK.

for further information contact angela.baldassarre@unibocconi.it