Macroeconomic aggregates and heterogeneity

ongoing

MacHete investigates how macroeconomic changes -such as shifts in inflation or employment- affect different groups within society, and how these diverse impacts shape the broader economy. The project aims to provide fresh insights into how the economy functions and how it can better meet the needs of all social segments. Traditional macroeconomic models often overlook key differences in income, wealth, and behavior, but MacHete integrates these variations by combining micro-level data with macroeconomic aggregates, offering a unique perspective on the dynamics of the broader economy. The fellowship will take place at the Center for Operations Research and Econometrics (CORE) at UCLouvain, in collaboration with Professor Francesca Monti. MacHete blends macroeconomic theory with advanced statistical methods and machine learning, employing techniques such as Functional Structural Vector Autoregressions (FSVARs) to model the interactions between macroeconomic shocks and distributional changes. This approach provides deeper insights into how policies and economic fluctuations impact different social groups. Results from MacHete will be disseminated at international conferences. A key project outcome will be a series of papers examining how agents' expectations—particularly regarding inflation and income—evolve in response to aggregate shocks. By studying the distribution of these expectations, the project will uncover how varying beliefs shape individual decision-making and broader macroeconomic outcomes. These findings will equip policymakers with the tools to design interventions that are both effective and equitable, ensuring that policies address diverse expectations and vulnerabilities. Through its innovative methods and focus on heterogeneity, MacHete will produce impactful research that contributes meaningfully to both academic scholarship and policymaking, helping policymakers make informed decisions that promote fairness and efficiency in economic outcomes.