Heterogeneous agent (HA) models and two-asset HANK model: Review of some computational models

Josheski, Dushko and Apostolov, Mico (2024) Heterogeneous agent (HA) models and two-asset HANK model: Review of some computational models. Southeast European Review of Business and Economics (SERBE), 4 (2). pp. 32-66. ISSN 2671-339X

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Abstract

These are Heterogeneous Agent HA models with continuum of agents in discrete and continuous time with aggregate uncertainty i.e. these are Krusell-Smith (1997) (1998) types of models. The two asset HANK (Heterogeneous Agent New Keynesian) model uses discrete cosine transform (DCT) technique and sequential equilibrium with recursive individual planning as a sequence of discretized Bellman equations. Some of the models are placed in a two-sector economy as Kiyotaki, Moore (1997) and one sector growth model studied by Huggett (1997). Huggett (1993) is a HACT (heterogeneous agent model in continuous time) model that describes solution for a simple continuous time heterogeneous agent economy. Some of the models are computed with MIT shock which is an unexpected shock that hits an economy at its steady state, leading to a transition path back towards the economy’s steady state. Heterogeneous Agent New Keynesian (HANK) models are emerging as leading frameworks to study the impact of monetary and fiscal policy on the macroeconomy. Central idea of this paper is the notion that representative agent models were wrong turn for modern macroeconomics especially for general equilibrium model (some individuals are some are not liquidity constrained) and that central problems of macroeconomics cannot arise in representative agent models (debt, bankruptcy, asymmetric information).Results from models prove the importance of distributions of household income, wealth, savings decisions in order HA and HANK models to construct optimal monetary policy as opposed to RANK ( Representative Agent New Keynesian )model “lean against the wind “ monetary policy response.

Item Type:	Article
Subjects:	Social Sciences > Economics and business
Divisions:	Faculty of Tourism and Business Logistics
Depositing User:	Dusko Josevski
Date Deposited:	14 Mar 2024 09:58
Last Modified:	14 Mar 2024 09:58
URI:	https://eprints.ugd.edu.mk/id/eprint/33858

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