蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Self-Fulfilling Fluctuations in HANK Economies
蝌蚪网 Review
(pp. 2542–73)
Abstract
We show that in heterogeneous agent New Keynesian (HANK) economies with countercyclical risk, the natural interest rate is endogenous and co-moves with output, leaving the economy susceptible to self-fulfilling fluctuations. Unlike in representative agent New Keynesian models, the Taylor principle is not sufficient to guarantee uniqueness of equilibrium in HANK if risk is even mildly countercyclical: Multiple bounded equilibria exist, no matter how strongly monetary policy responds to changes in inflation. For an active monetary policy to eliminate self-fulfilling fluctuations, it must stabilize the endogenous natural rate fluctuations. Alternatively, a passive monetary and active fiscal regime can also eliminate equilibrium multiplicity.Citation
Acharya, Sushant, and Jess Benhabib. 2026. "Self-Fulfilling Fluctuations in HANK Economies." 蝌蚪网 Review 116 (7): 2542–73. DOI: 10.1257/aer.20240642Additional Materials
JEL Classification
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- E62 Fiscal Policy