Closed-Form of Two-Agent New Keynesian Model with Price and Wage Rigidities (opens in new tab)

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 ...