Household heterogeneity and the transmission of foreign shocks
| Autor: | Federica Romei, Sergio de Ferra, Kurt Mitman |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Economics and Econometrics
050208 finance media_common.quotation_subject 05 social sciences Devaluation 1. No poverty Fear of floating Current account Monetary economics External debt Sudden stop Currency Output gap Debt 8. Economic growth 0502 economics and business Economics 050207 economics Finance 050205 econometrics media_common |
| Zdroj: | Journal of International Economics |
| ISSN: | 0022-1996 |
| DOI: | 10.1016/j.jinteco.2020.103303 |
| Popis: | We study the role of heterogeneity in the transmission of foreign shocks. We build a Heterogeneous-Agent New-Keynesian Small Open Model Economy (HANKSOME) that experiences a current account reversal. Households' portfolio composition and the extent of foreign currency borrowing are key determinants of the magnitude of the contraction in consumption associated with a sudden stop in capital inflows. The contraction is more severe when households are leveraged and owe debt in foreign currency. In this setting, the revaluation of foreign debt causes a larger contraction in aggregate consumption when debt and leverage are concentrated among poorer households. Closing the output gap via an exchange-rate devaluation may therefore be detrimental to household welfare due to the heterogeneous impact of the foreign debt revaluation. Our HANKSOME framework can rationalize the observed “fear of floating” in emerging market economies, even in the absence of contractionary devaluations. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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