Noah Kwicklis

Research

Active vs. passive policy and the trade-off between output and inflation in HANK. Journal of Monetary Economics, April 2025, Vol. 151. Article 103732.

When fiscal policy is active and monetary policy is passive in a heterogeneous agent New Keynesian (HANK) model, deficit-financed transfers to low-asset households lead to similar cumulative inflation but greater increases in real output than transfers to wealthier households. I use the inverse of the “Phillips multiplier”, the price level sacrifice ratio, to quantify this dynamic. Household heterogeneity and targeted policy change the timing of output gaps, making this consistent with the Phillips Curve and rendering conventional sacrifice ratio intuition misleading for assessing the inflation/output trade-off between policies.

Sticky Expectations, Fiscal Transfers, Inflation, and Unemployment in HANK (Job Market Paper)

I use a new numerical technique to solve and estimate a medium-scale sticky-expectation heterogeneous agent New Keynesian (HANK) model in order to study the effects of the post-COVID fiscal stimulus. Sticky information frictions triple the one-year transfer multiplier of a stimulus check intervention from 0.10 to 0.30. The model predicts that the U.S. fiscal transfer stimulus in 2020 and 2021 reduced the COVID recession's cumulative real GDP per capita losses by 25%, compared to a scenario where the transfers did not take place. Despite being highly stimulative for output, the model suggests that transitory fiscal transfers have relatively modest impacts on inflation and unemployment.

State-Space HANK and Sticky Expectations

Linearized full information rational expectations heterogeneous agent models can be easily converted into a sticky expectations environment, even when solved in state-space form. The technique recycles the Jacobians of the full information model with only a few modifications. The process is greatly simplified by working in continuous time, which facilitates the use of natural boundary conditions to ensure agents do not violate idiosyncratic borrowing constraints and the measure of updating agents at any given moment is zero. After solving the full information model, the conversion to sticky expectations requires only very straightforward matrix manipulation.

What can a Trillion Dollars Buy? Sticky expectations and active fiscal policy in the 2020s (Working paper coming soon)

Poverty, the EITC, and the Mental Health of Children and Adolescents
I hypothesize that cash transfers to poor households improve the mental health of recipient children. Specifically, I posit that the 1993 Omnibus Budget Reconciliation Act’s expansion of the Earned Income Tax Credit (EITC) could have worked through a number of mechanisms to reduce the incidence of depression, anxiety, and antisocial behavior among children in eligible households, as reported by broad survey indexes. To test this claim, I estimate the intent-to-treat (ITT) effect of the EITC using a difference-in-differences (DID) identification strategy, with linear controls and household and region fixed effects. I find evidence that the federal tax credit expansion reduced externalizing behavior and tendencies among low-income children.