We show that New Keynesian models with frictionless labor supply face a challenge: given standard parameters, they cannot simultaneously match plausible estimates of marginal propensities to consume (MPCs), marginal propensities to earn (MPEs), and fiscal multipliers. A HANK model with sticky wages provides a solution to this trilemma.
No takes yet. Share an insight, caveat, or question.
Auclert et al. (2021) studied this question.
Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context: