Add literature context to OpenHA

.gitignore

@@ -116,6 +116,12 @@ env-*/
 # Mac
 .DS_Store
 
+# Project-local dotfiles (personal shell config)
+dotfiles/
+
 # Cursor / SpecStory
 .cursor*
 .specstory*/
+
+# Copyrighted source material (papers, LaTeX from MathPix, etc.)
+source/

models/We-Would-Like-In-Econ-ARK/OpenHA/OpenHA_intro.ipynb

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+{
+  "cells": [
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## Paper\n",
+        "\n",
+        "**Exchange rates and monetary policy with heterogeneous agents: Sizing up the real income channel**\n",
+        "\n",
+        "Adrien Auclert, Matthew Rognlie, Martin Souchier, Ludwig Straub\n",
+        "\n",
+        "2021 · SSRN Electronic Journal / NBER Working Paper 28872\n",
+        "\n",
+        "[DOI: 10.3386/w28872](https://doi.org/10.3386/w28872) · [SSRN](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3856853)"
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## Original ballpark authors\n",
+        "\n",
+        "Junhyeok (Julian) Shin — May 6, 2023\n",
+        "\n",
+        "(Original notebook: Shin_ARSS.ipynb)"
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## Updated by\n",
+        "\n",
+        "Siying Li — February 13, 2025"
+      ]
+    }
+  ],
+  "metadata": {
+    "kernelspec": {
+      "display_name": "Python 3",
+      "language": "python",
+      "name": "python3"
+    },
+    "language_info": {
+      "name": "python",
+      "version": "3.8.0"
+    }
+  },
+  "nbformat": 4,
+  "nbformat_minor": 2
+}

models/We-Would-Like-In-Econ-ARK/OpenHA/OpenHA_prior-literature.ipynb

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+{
+  "cells": [
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "# Prior Literature for OpenHA\n",
+        "\n",
+        "This notebook surveys the key prior literature on which {cite:t}`Auclert2021-ki` builds. The paper rests on three strands: open-economy New Keynesian foundations, heterogeneous-agent monetary transmission, and the exchange rate–real income–redistribution nexus."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## 1. Open-Economy New Keynesian Foundations\n",
+        "\n",
+        "### Galí and Monacelli (2004)\n",
+        "\n",
+        "{cite:t}`Gali2004-kj` lay out a small open economy version of the Calvo sticky-price model and reduce the equilibrium dynamics to a simple representation in domestic inflation and the output gap. They compare three alternative rule-based policy regimes — domestic-inflation and CPI-based Taylor rules, and an exchange rate peg — and show that a key difference lies in the relative amount of exchange rate volatility each entails. This canonical framework is the starting point for the model in {cite:t}`Auclert2021-ki`, which extends it with household heterogeneity and incomplete markets.\n",
+        "\n",
+        "### Obstfeld and Rogoff (1995)\n",
+        "\n",
+        "{cite:t}`Obstfeld1995-wg` develop a two-country general equilibrium model with nominal rigidities that revived the field of open-economy macroeconomics (the \"New Open Economy Macroeconomics\"). Their Redux model provides the micro-founded treatment of exchange rate dynamics, terms-of-trade effects, and expenditure switching that underlies the open-economy structure of {cite:t}`Auclert2021-ki`.\n",
+        "\n",
+        "### Clarida, Galí, and Gertler (2002)\n",
+        "\n",
+        "{cite:t}`Clarida2002-gd` develop a tractable two-country sticky-price model to study international monetary policy design. They find that in the Nash equilibrium the policy problem for each central bank is isomorphic to the closed-economy case, but gains from cooperation arise through the impact of foreign activity on domestic marginal cost. This framework informs how {cite:t}`Auclert2021-ki` models monetary policy transmission across borders.\n",
+        "\n",
+        "### Corsetti and Pesenti (2001)\n",
+        "\n",
+        "{cite:t}`Corsetti2001-dc` provide a choice-theoretic model of macroeconomic interdependence that emphasizes positive externalities of foreign monetary expansions on domestic welfare. Their analysis of structural spillovers and strategic complementarities provides foundations for the international transmission mechanisms in {cite:t}`Auclert2021-ki`."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## 2. Heterogeneous-Agent Monetary Transmission\n",
+        "\n",
+        "### Kaplan, Moll, and Violante (2018)\n",
+        "\n",
+        "{cite:t}`Kaplan2018-to` revisit the transmission mechanism from monetary policy to household consumption in a Heterogeneous Agent New Keynesian (HANK) model. They show that indirect effects of interest rate cuts — operating through general equilibrium increases in labor demand — far outweigh direct intertemporal substitution effects. This finding is central to {cite:t}`Auclert2021-ki`, which extends the HANK framework to an open-economy setting where the indirect channel interacts with exchange rate movements.\n",
+        "\n",
+        "### Auclert (2019)\n",
+        "\n",
+        "{cite:t}`Auclert2019-js` evaluates the role of redistribution in the transmission of monetary policy to consumption, identifying three channels: an earnings heterogeneity channel, a Fisher channel from unexpected inflation, and an interest rate exposure channel. Using Italian and US data, the paper shows that all three amplify monetary policy effects. {cite:t}`Auclert2021-ki` extends this redistribution logic to the open-economy context, where exchange rate movements create additional redistributive effects through import prices.\n",
+        "\n",
+        "### McKay, Nakamura, and Steinsson (2016)\n",
+        "\n",
+        "{cite:t}`McKay2016-ss` show that the power of forward guidance is highly sensitive to the complete-markets assumption. When agents face uninsurable income risk and borrowing constraints, a precautionary savings effect tempers responses to changes in future interest rates, substantially reducing the power of forward guidance. This insight about how incomplete markets alter monetary transmission is a building block for the heterogeneous-agent structure in {cite:t}`Auclert2021-ki`.\n",
+        "\n",
+        "### Werning (2015)\n",
+        "\n",
+        "{cite:t}`Werning2015-vz` studies aggregate consumption dynamics under incomplete markets, deriving a generalized Euler relation that provides a tractable way to incorporate incomplete markets in macroeconomic models. The paper shows that away from benchmark cases, consumption becomes more sensitive to interest rates, especially future rates. This analytical framework underpins the consumption function representation in {cite:t}`Auclert2021-ki`."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## 3. Exchange Rates, Real Income, and Redistribution\n",
+        "\n",
+        "### Krugman and Taylor (1978)\n",
+        "\n",
+        "{cite:t}`Krugman1978-yz` develop a simple Keynesian model showing that currency depreciation can be contractionary if imports exceed exports, if there are differences in consumption propensities from profits and wages, or if government revenues increase from devaluation. This early formalization of the contractionary devaluation hypothesis directly motivates the central question in {cite:t}`Auclert2021-ki`: can exchange rate depreciations reduce output in a heterogeneous-agent model?\n",
+        "\n",
+        "### Díaz-Alejandro (1963)\n",
+        "\n",
+        "{cite:t}`Diaz-Alejandro1963-zf` provides a seminal note on how devaluation can redistribute income from workers (with high MPCs) to profit earners (with low MPCs), leading to a contractionary aggregate demand effect. This redistribution channel is precisely the mechanism that {cite:t}`Auclert2021-ki` formalizes and quantifies in a modern heterogeneous-agent framework.\n",
+        "\n",
+        "### Cravino and Levchenko (2016)\n",
+        "\n",
+        "{cite:t}`Cravino2016-hl` study the distributional consequences of large devaluations, showing that exchange rate movements have heterogeneous effects across households depending on their consumption baskets. This evidence on the distributional dimension of exchange rate changes motivates the heterogeneous-agent approach in {cite:t}`Auclert2021-ki`.\n",
+        "\n",
+        "### de Ferra, Mitman, and Romei (2020)\n",
+        "\n",
+        "{cite:t}`de-Ferra2020-ai` study how household heterogeneity affects the transmission of foreign shocks, showing that incomplete markets and heterogeneous portfolios alter the propagation of external shocks in an open economy. Their work bridges heterogeneous-agent models and open-economy macro, providing a direct antecedent to {cite:t}`Auclert2021-ki`.\n",
+        "\n",
+        "### Bems and di Giovanni (2016)\n",
+        "\n",
+        "{cite:t}`Bems2016-us` show that an income effect — not relative price changes — can drive expenditure switching between domestic and imported goods, using Latvian scanner data from the 2008–2009 crisis. Their finding that income-induced expenditure switching accounts for a large share of the fall in imports provides micro-level evidence for the real income channel that {cite:t}`Auclert2021-ki` formalizes at the macro level."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## Key Gap Addressed\n",
+        "\n",
+        "Prior work had either open-economy models with a real income channel but no household heterogeneity, or HANK models with redistribution but no open-economy structure. The real income channel had therefore never been **sized** in a model with both ingredients. {cite:t}`Auclert2021-ki` builds a tractable open-economy HANK and uses it to quantify the real income channel — including its redistribution and MPC dimensions — relative to the standard expenditure switching channel."
+      ]
+    }
+  ],
+  "metadata": {
+    "kernelspec": {
+      "display_name": "Python 3",
+      "language": "python",
+      "name": "python3"
+    },
+    "language_info": {
+      "name": "python",
+      "version": "3.8.0"
+    }
+  },
+  "nbformat": 4,
+  "nbformat_minor": 2
+}

models/We-Would-Like-In-Econ-ARK/OpenHA/OpenHA_subsequent-literature.ipynb

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+{
+  "cells": [
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "# Subsequent Literature Citing OpenHA\n",
+        "\n",
+        "This notebook surveys papers that cite {cite:t}`Auclert2021-ki`. The citing work clusters into three broad directions: open-economy HANK in emerging markets, extensions beyond the small open economy, and fiscal–monetary interaction."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## 1. Open-Economy HANK in Emerging Markets\n",
+        "\n",
+        "Several papers apply and extend the real income channel of {cite:t}`Auclert2021-ki` to emerging-market settings, where contractionary devaluations, dollarization, and high MPC heterogeneity are first-order concerns.\n",
+        "\n",
+        "### Campos and Paz (2023)\n",
+        "\n",
+        "{cite:t}`real_campos_2023` study the real income channel and contractionary devaluations in a heterogeneous-agent model calibrated to Latin American economies. They show that the mechanisms identified by {cite:t}`Auclert2021-ki` — the real income and multiplier channels — are quantitatively large in countries with high import dependence and concentrated income distributions.\n",
+        "\n",
+        "### Blanco, Drenik, and Zaratiegui (2025)\n",
+        "\n",
+        "{cite:t}`nominal_blanco_2025` study how nominal devaluations affect inflation and inequality. Building on the open-economy HANK framework of {cite:t}`Auclert2021-ki`, they show that devaluations disproportionately hurt lower-income households through import price increases, and that this distributional channel feeds back into aggregate dynamics.\n",
+        "\n",
+        "### Ferrante and Gornemann (2022)\n",
+        "\n",
+        "{cite:t}`devaluations_ferrante_2022` examine how deposit dollarization interacts with household heterogeneity during devaluations. They extend the framework of {cite:t}`Auclert2021-ki` by adding a dollarized financial sector, showing that balance-sheet effects from currency mismatch amplify the contractionary real income channel.\n",
+        "\n",
+        "### Signe, Poutineau, and Gankou (2026)\n",
+        "\n",
+        "{cite:t}`monetary_signe_2026` apply heterogeneous-agent monetary policy analysis to the CEMAC zone (Central Africa), drawing on {cite:t}`Auclert2021-ki` to study how exchange rate policy interacts with household heterogeneity in developing-country monetary unions.\n",
+        "\n",
+        "### Oskolkov (2021)\n",
+        "\n",
+        "{cite:t}`exchange_oskolkov_2021` studies exchange rate policy and heterogeneity in small open economies, examining how the optimal exchange rate regime depends on the degree of household heterogeneity — a question directly motivated by the findings of {cite:t}`Auclert2021-ki`."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## 2. Beyond the Small Open Economy\n",
+        "\n",
+        "A second strand extends {cite:t}`Auclert2021-ki` from a small open economy to two-region or monetary-union HANK models, and studies international spillovers.\n",
+        "\n",
+        "### Bayer, Kriwoluzky, Müller, and Seyrich (2024)\n",
+        "\n",
+        "{cite:t}`hankmmlmath_bayer_2024` develop a HANK² model of monetary unions — a two-region heterogeneous-agent model where each region has incomplete markets. They build on {cite:t}`Auclert2021-ki` to show how asymmetric shocks and heterogeneous fiscal spaces interact within a currency union.\n",
+        "\n",
+        "### Bellifemine, Couturier, and Jamilov (2025)\n",
+        "\n",
+        "{cite:t}`monetary_bellifemine_2025` study monetary unions with heterogeneous fiscal space. Extending the open-economy HANK approach of {cite:t}`Auclert2021-ki` to a multi-country setting, they show that differences in fiscal capacity across member states alter the transmission of common monetary policy.\n",
+        "\n",
+        "### Yang, Zhang, and Hou (2023)\n",
+        "\n",
+        "{cite:t}`twocountry_yang_2023` develop a two-country HANK model with trade frictions, extending the single-country framework of {cite:t}`Auclert2021-ki` to study how household heterogeneity in both countries affects the international transmission of shocks.\n",
+        "\n",
+        "### Chen, Lazarakis, and Varthalitis (2025)\n",
+        "\n",
+        "{cite:t}`debt_chen_2025` study debt targets and fiscal consolidation in a Euro Area HANK model, incorporating the open-economy heterogeneous-agent mechanisms from {cite:t}`Auclert2021-ki` to analyze how fiscal rules interact with monetary policy in a currency union.\n",
+        "\n",
+        "### Acharya and Pesenti (2024)\n",
+        "\n",
+        "{cite:t}`spillovers_acharya_2024` study international spillovers and spillbacks of monetary policy. Drawing on {cite:t}`Auclert2021-ki`, they show how heterogeneous-agent channels amplify the cross-border transmission of monetary policy shocks.\n",
+        "\n",
+        "### Georgiadis, Müller, and Schumann (2024)\n",
+        "\n",
+        "{cite:t}`global_georgiadis_2024` study global risk and the dollar, examining how US monetary policy shocks spill over to other economies through exchange rate and real income channels identified by {cite:t}`Auclert2021-ki`.\n",
+        "\n",
+        "### Kyriazis (2023)\n",
+        "\n",
+        "{cite:t}`quantitative_kyriazis_2023` studies quantitative easing spillovers, analyzing how unconventional monetary policy transmits internationally through the heterogeneous-agent channels emphasized by {cite:t}`Auclert2021-ki`.\n",
+        "\n",
+        "### De Leo, Gopinath, and Kalemli-Özcan (2022)\n",
+        "\n",
+        "{cite:t}`monetary_deleo_2022` study monetary policy cyclicality in emerging economies, showing that the real income channel from {cite:t}`Auclert2021-ki` helps explain why emerging-market central banks often tighten rather than loosen in response to capital outflows."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## 3. Fiscal–Monetary Interaction\n",
+        "\n",
+        "A third cluster of papers uses the framework of {cite:t}`Auclert2021-ki` to study interactions between fiscal and monetary policy in open economies.\n",
+        "\n",
+        "### Aggarwal, Auclert, Rognlie, and Straub (2023)\n",
+        "\n",
+        "{cite:t}`excess_aggarwal_2023` study excess savings and twin deficits — the transmission of fiscal stimulus in open economies. Building directly on {cite:t}`Auclert2021-ki`, they show that fiscal transfers in a HANK open economy generate both current account deficits (through higher imports) and budget deficits, with the magnitudes depending on household heterogeneity and the real income channel.\n",
+        "\n",
+        "### Auclert, Monnery, Rognlie, and Straub (2023)\n",
+        "\n",
+        "{cite:t}`managing_auclert_2023` study how to manage an energy shock with fiscal and monetary policy in an open-economy HANK model. They extend {cite:t}`Auclert2021-ki` to analyze supply-side shocks, showing that the real income channel is central to understanding how energy price increases transmit to aggregate demand.\n",
+        "\n",
+        "### Nuño, Renner, and Scheidegger (2025)\n",
+        "\n",
+        "{cite:t}`monetary_nuo_2025` study monetary policy with persistent supply shocks, incorporating the heterogeneous-agent transmission mechanisms from {cite:t}`Auclert2021-ki` to analyze how central banks should respond when supply disruptions have distributional consequences.\n",
+        "\n",
+        "### McKay and Wolf (2022)\n",
+        "\n",
+        "{cite:t}`optimal_mckay_2022` study optimal policy rules in HANK models. They extend the analysis to open-economy settings influenced by {cite:t}`Auclert2021-ki`, examining how the presence of the real income channel and MPC heterogeneity alters the design of optimal monetary policy rules.\n",
+        "\n",
+        "### Pieroni (2023)\n",
+        "\n",
+        "{cite:t}`energy_pieroni_2023` studies energy shortages and aggregate demand in a HANK model, showing that the output loss and distributional burden from energy shocks are amplified by the real income channel mechanisms identified in {cite:t}`Auclert2021-ki`."
+      ]
+    },
+    {
+      "cell_type": "markdown",
+      "metadata": {},
+      "source": [
+        "## Open Questions\n",
+        "\n",
+        "Cutting-edge topics building on {cite:t}`Auclert2021-ki` include:\n",
+        "\n",
+        "- Empirical validation of the real income channel with micro data\n",
+        "- Integrating household and firm heterogeneity in one open-economy HANK\n",
+        "- A unified treatment of financial frictions and dollarization with the real income channel\n",
+        "- Non-linearities and large shocks (contractionary devaluations, hysteresis)\n",
+        "- Optimal exchange rate regime choice in open-economy HANK\n",
+        "- Welfare-based policy evaluation that explicitly accounts for inequality and heterogeneity"
+      ]
+    }
+  ],
+  "metadata": {
+    "kernelspec": {
+      "display_name": "Python 3",
+      "language": "python",
+      "name": "python3"
+    },
+    "language_info": {
+      "name": "python",
+      "version": "3.8.0"
+    }
+  },
+  "nbformat": 4,
+  "nbformat_minor": 2
+}