NBER

Sergio de Ferra

Department of Economics
Stockholm University

E-Mail: sergio.deferra@ne.su.se
Institutional Affiliation: Stockholm University

NBER Working Papers and Publications

October 2019Household Heterogeneity and the Transmission of Foreign Shocks
with Kurt Mitman, Federica Romei: w26402
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...

Published: Sergio de Ferra & Kurt Mitman & Federica Romei, 2020. "Household heterogeneity and the transmission of foreign shocks," Journal of International Economics, . citation courtesy of

June 2019Household Heterogeneity and the Transmission of Foreign Shocks
with Kurt Mitman, Federica Romei
in NBER International Seminar on Macroeconomics 2019, Kristin Forbes and Pierre-Olivier Gourinchas, organizers
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...

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