Monetary Policy in a Non‐Representative Agent Economy: A Survey

29 Pages Posted: 16 Jul 2013

See all articles by Michal Brzoza-Brzezina

Michal Brzoza-Brzezina

National Bank of Poland; Warsaw School of Economics (SGH)

Marcin Kolasa

National Bank of Poland; Warsaw School of Economics (SGH)

Grzegorz Koloch

National Bank of Poland; Warsaw School of Economics

Krzysztof Makarski

National Bank of Poland; Warsaw School of Economics (SGH)

Michał Rubaszek

National Bank of Poland; Warsaw School of Economics (SGH)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

It is well known that central bank policies affect not only macroeconomic aggregates, but also their distribution across economic agents. Similarly, a number of papers demonstrated that heterogeneity of agents may matter for the transmission of monetary policy to macro variables. Despite this, the mainstream monetary economics literature has so far been dominated by dynamic stochastic general equilibrium models with representative agents. This paper aims to tilt this imbalance towards heterogeneous agents setups by surveying the main positive and normative findings of this line of the literature, and suggesting areas in which these models could be implemented. In particular, we review studies that analyse the heterogeneity of (i) households’ income, (ii) households’ preferences, (iii) consumers’ age, (iv) expectations and (v) firms’ productivity and financial position. We highlight the results on issues that, by construction, cannot be investigated in a representative agent framework and discuss important papers modifying the findings from the representative agent literature.

Keywords: Heterogeneous agents, Monetary policy

Suggested Citation

Brzoza-Brzezina, Michal and Kolasa, Marcin and Koloch, Grzegorz and Makarski, Krzysztof and Rubaszek, Michal, Monetary Policy in a Non‐Representative Agent Economy: A Survey (September 2013). Journal of Economic Surveys, Vol. 27, Issue 4, pp. 641-669, 2013. Available at SSRN: https://ssrn.com/abstract=2294277 or http://dx.doi.org/10.1111/j.1467-6419.2011.00710.x

Michal Brzoza-Brzezina (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH)

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Marcin Kolasa

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Grzegorz Koloch

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Krzysztof Makarski

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH)

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Michal Rubaszek

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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