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.

Unemployment and Inflation: A Bayesian HANK Approach
A convenient method for solving state-space HANK models with sticky expectations (in continuous time)
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 takes only a few additional lines of code.

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.