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NBERWORKINGPAPERSERIES
PRICELEVELANDINFLATIONDYNAMICSIN
HETEROGENEOUSAGENTECONOMIES
GregKaplan
GeorgiosNikolakoudis
GiovanniL.Violante
WorkingPaper31433
/papers/w31433
NATIONALBUREAUOFECONOMICRESEARCH
1050MassachusettsAvenue
Cambridge,MA02138
July2023
WearegratefultoMarkAguiar,FernandoAlvarez,MarcoBassetto,JessBenhabib,JohnCochrane,JoelP.Flynn,MarianoKulish,BenMoll,BrucePreston,ThomasSargent,andChrisSimsforhelpfulcomments.Firstdraft:28April2023.TheviewsexpressedhereinarethoseoftheauthorsanddonotnecessarilyreflecttheviewsoftheNationalBureauofEconomicResearch.
Atleastoneco-authorhasdisclosedadditionalrelationshipsofpotentialrelevanceforthisresearch.Furtherinformationisavailableonlineat/papers/w31433
NBERworkingpapersarecirculatedfordiscussionandcommentpurposes.Theyhavenotbeenpeer-reviewedorbeensubjecttothereviewbytheNBERBoardofDirectorsthataccompaniesofficialNBERpublications.
?2023byGregKaplan,GeorgiosNikolakoudis,andGiovanniL.Violante.Allrightsreserved.Shortsectionsoftext,nottoexceedtwoparagraphs,maybequotedwithoutexplicitpermissionprovidedthatfullcredit,including?notice,isgiventothesource.
PriceLevelandInflationDynamicsinHeterogeneousAgentEconomies
GregKaplan,GeorgiosNikolakoudis,andGiovanniL.Violante
NBERWorkingPaperNo.31433
July2023
JELNo.E3,E4,E5,E6,H2,H3
ABSTRACT
Westudyequilibriainaheterogeneous-agentincomplete-marketeconomywithnominalgovernmentdebtandflexibleprices.Unlikeinrepresentativeagenteconomies,steady-stateequilibriaexistwhenthegovernmentrunspersistentdeficits,providedthatthelevelofdeficitsisnottoolarge.Intheseequilibria,therealinterestrateisbelowthegrowthrateoftheeconomy.WequantifythemaximumsustainabledeficitfortheUSandshowthatitislowerundermo
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