Staff Reports
Estimating HANK for Central Banks
Number 1071
August 2023

JEL classification: C11, C32, D31, E32, E37, E52

Authors: Sushant Acharya, William Chen, Marco Del Negro, Keshav Dogra, Aidan Gleich, Shlok Goyal, Ethan Matlin, Donggyu Lee, Reca Sarfati, and Sikata Sengupta

We provide a toolkit for efficient online estimation of heterogeneous agent (HA) New Keynesian (NK) models based on Sequential Monte Carlo methods. We use this toolkit to compare the out-of-sample forecasting accuracy of a prominent HANK model, Bayer et al. (2022), to that of the representative agent (RA) NK model of Smets and Wouters (2007, SW). We find that HANK’s accuracy for real activity variables is notably inferior to that of SW. The results for consumption in particular are disappointing since the main difference between RANK and HANK is the replacement of the RA Euler equation with the aggregation of individual households’ consumption policy functions, which reflects inequality.

Full Article
Author Disclosure Statement(s)
Suggested Citation:
Acharya, Sushant, William Chen, Marco Del Negro, Keshav Dogra, Aidan Gleich, Shlok Goyal, Ethan Matlin, Donggyu Lee, Reca Sarfati, and Sikata Sengupta. 2023. “Estimating HANK for Central Banks.” Federal Reserve Bank of New York Staff Reports, no. 1071, August. https://doi.org/10.59576/sr.1071

By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close