Data and Code for: Shocks, Frictions, and Inequality in US Business Cycles

Principal Investigator(s): View help for Principal Investigator(s) Christian Bayer, University of Bonn; Benjamin Born, Frankfurt School of Finance and Management; Ralph Lütticke, University of Tuebingen

Version: View help for Version V1

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Citation:

Bayer, Christian, Born, Benjamin, and Lütticke, Ralph. Data and Code for: Shocks, Frictions, and Inequality in US Business Cycles: BBL_Inequality_Replication. Nashville, TN: American Economic Association [publisher], 2024. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2024-04-16. https://doi.org/10.3886/E194108V1-156965

To view the citation for the overall project, see http://doi.org/10.3886/E194108V1.

Project Description

Summary: We show how a heterogeneous-agent New-Keynesian (HANK) model with incomplete markets and portfolio choice can be estimated in state space using a Bayesian approach. To render estimation feasible, the structure of the economy can be exploited and the dimensionality of the model automatically reduced based on the Bayesian priors. We apply this approach to analyze how much inequality matters for the business cycle and vice versa. Even when the model is estimated on aggregate data alone and with a set of shocks and frictions designed to match aggregate data, it broadly reproduces observed US inequality dynamics.

Scope of Project

Subject Terms: Bayesian Estimation; Business Cycles; Dimensionality Reduction; Income and Wealth Inequality; Incomplete Markets

JEL Classification:
      C11 Bayesian Analysis: General
      D31 Personal Income, Wealth, and Their Distributions
      E32 Business Fluctuations; Cycles
      E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

Geographic Coverage: US

Data Type(s): aggregate data

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Published Versions

V1 [2024-04-16]

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