Closed-Form of Two-Agent New Keynesian Model with Price and Wage Rigidities
Fuente:
arXiv
Guardado en:
| Autor principal: | |
|---|---|
| Formato: | Preprint |
| Publicado: |
2025
|
| Materias: | |
| Acceso en línea: | |
| Etiquetas: |
Agregar Etiqueta
Sin Etiquetas, Sea el primero en etiquetar este registro!
|
| _version_ | 1866914526751883264 |
|---|---|
| author | Miyazaki, Kenji |
| author_facet | Miyazaki, Kenji |
| contents | This paper analytically demonstrates that, in a Two-Agent New Keynesian model with Rotemberg-type price and wage rigidities, monetary transmission can be amplified when two mechanisms are sufficiently strong: the heterogeneity-induced IS-slope effect and the price-stickiness channel. We also show when amplification weakens or disappears, most notably under pure wage stickiness, where the price channel shuts down and the heterogeneity-driven term vanishes. The framework features household heterogeneity between savers and hand-to-mouth households and is derived from microeconomic foundations while avoiding restrictive assumptions on relative wages or labor supply across types that are common in prior analytical work. The closed-form solution makes transparent how price stickiness, wage stickiness, and the share of hand-to-mouth households jointly shape amplification. We further derive a modified aggregate welfare loss function that quantifies how heterogeneity, operating through distributional effects from firm profits, changes the relative importance of stabilizing inflation. Overall, the tractable yet micro-founded analytical framework clarifies the interaction between household heterogeneity and nominal rigidities and identifies sufficient conditions under which monetary policy gains or loses traction. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2508_12073 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Closed-Form of Two-Agent New Keynesian Model with Price and Wage Rigidities Miyazaki, Kenji Theoretical Economics This paper analytically demonstrates that, in a Two-Agent New Keynesian model with Rotemberg-type price and wage rigidities, monetary transmission can be amplified when two mechanisms are sufficiently strong: the heterogeneity-induced IS-slope effect and the price-stickiness channel. We also show when amplification weakens or disappears, most notably under pure wage stickiness, where the price channel shuts down and the heterogeneity-driven term vanishes. The framework features household heterogeneity between savers and hand-to-mouth households and is derived from microeconomic foundations while avoiding restrictive assumptions on relative wages or labor supply across types that are common in prior analytical work. The closed-form solution makes transparent how price stickiness, wage stickiness, and the share of hand-to-mouth households jointly shape amplification. We further derive a modified aggregate welfare loss function that quantifies how heterogeneity, operating through distributional effects from firm profits, changes the relative importance of stabilizing inflation. Overall, the tractable yet micro-founded analytical framework clarifies the interaction between household heterogeneity and nominal rigidities and identifies sufficient conditions under which monetary policy gains or loses traction. |
| title | Closed-Form of Two-Agent New Keynesian Model with Price and Wage Rigidities |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2508.12073 |