Institutional Affiliation: Norges Bank
NBER Working Papers and Publications
|June 2017||When Inequality Matters for Macro and Macro Matters for Inequality|
with Greg Kaplan, Benjamin Moll, Thomas Winberry, Christian Wolf
in NBER Macroeconomics Annual 2017, volume 32, Martin Eichenbaum and Jonathan A. Parker, editors
|When Inequality Matters for Macro and Macro Matters for Inequality|
with Greg Kaplan, Benjamin Moll, Thomas Winberry, Christian Wolf: w23494
We develop an efficient and easy-to-use computational method for solving a wide class of general equilibrium heterogeneous agent models with aggregate shocks, together with an open source suite of codes that implement our algorithms in an easy-to-use toolbox. Our method extends standard linearization techniques and is designed to work in cases when inequality matters for the dynamics of macroeconomic aggregates. We present two applications that analyze a two-asset incomplete markets model parameterized to match the distribution of income, wealth, and marginal propensities to consume. First, we show that our model is consistent with two key features of aggregate consumption dynamics that are difficult to match with representative agent models: (i) the sensitivity of aggregate consumption to...