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Marcel Peruffo
- 30 October 2024
- RESEARCH BULLETIN - No. 124Details
- Abstract
- Is the burden of distress in the banking sector shared equally among households, or is it distributed unevenly? Following the global financial crisis, the economic consequences of severe disruptions to the banking sector and the unequal impact of recessions have become a key concern of macroeconomic policy. This article examines how temporary banking sector losses affect households differently according to their income levels. The analysis reveals that low-income households bear most of the burden, while high-income households tend to be less adversely affected. While a fewhigh-income individuals exposed to bank dividends may face severe losses, those who are able to quickly adjust their portfolios may be able to take advantage of low asset prices, earn high returns going forward, and overall benefit from distress in the financial sector.
- JEL Code
- D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 21 February 2024
- WORKING PAPER SERIES - No. 2911Details
- Abstract
- We propose a novel methodology for solving Heterogeneous Agents New Keynesian (HANK) models with aggregate uncertainty and the Zero Lower Bound (ZLB) on nominal interest rates. Our efficient solution strategy combines the sequence-state Jacobian methodology in Auclert et al. (2021) with a tractable structure for aggregate uncertainty by means of a two-regimes shock structure. We apply the method to a simple HANK model to show that: 1) in the presence of aggregate non-linearities such as the ZLB, a dichotomy emerges between the aggregate impulse responses under aggregate uncertainty against the deterministic case; 2) aggregate uncertainty amplifies downturns at the ZLB, and household heterogeneity increases the strength of this amplification; 3) the effects of forward guidance are stronger when there is aggregate uncertainty.
- JEL Code
- D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies