Spillovers and Spillbacks / Sushant Acharya, Paolo A. Pesenti.

Format:

• Book

Author/Creator:

• Acharya, Sushant.

Contributor:

• National Bureau of Economic Research.
• Pesenti, Paolo A.

Series:

• Working Paper Series (National Bureau of Economic Research) no. w32245.
• NBER working paper series no. w32245

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

We study international monetary policy spillovers and spillbacks in a tractable two-country Heterogeneous Agent New Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as households in both countries face uninsurable income risk, and a real-income channel, as households have heterogeneous marginal propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change their sign relative to RANK. Spillovers are likely to be larger in economies with higher fractions of high MPC households and more countercyclical income risk. Quantitatively, both channels amplify spillovers by 30-60% relative to RANK.

Notes:

• Print version record
• March 2024.