Zheng Gong

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Email: gong.zheng@phd.unibocconi.it 
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JOB MARKET PAPER 
Decomposing HANK   

This paper introduces a decomposition of the responses of macroeconomic variables to aggregate shocks in heterogeneous-agent New Keynesian (HANK) models. I decompose these responses into representative-agent (RANK) and redistribution effects. To obtain RANK effects, I introduce counterfactual transfers that counteract the redistribution triggered by the aggregate shock and ensure that all agents have the same consumption responses. In this case, the responses of the HANK model are equivalent to those of a (fictitious) RANK model. I show the existence of such transfers in various heterogeneous-agent models. Redistribution effects are derived from the HANK model's response to the redistribution shock backup from the counterfactual transfers. Further analysis of these transfers analytically breaks down the redistribution shock into five channels: income exposure, interest rate exposure, tax exposure, asset price, and liquidity. I apply this decomposition to monetary policy shocks and quantitatively assess the contribution of each redistribution channel to the differences between HANK and RANK.