HANK: A New Core of Usable Macroeconomics

I argue that heterogeneous agent New Keynesian (HANK) models are a natural contender to define a new core of usable macroeconomics, replacing the IS-LM/Mundell-Fleming paradigm prevailing after the 1960s and the New Keynesian paradigm prevailing after the 1990s. HANK is “macro” (general equilibrium, aggregating up from behavior of optimizing units), is “usable” (featuring rational expectations, consistent with the known macro effects of monetary policy, and the micro behavior of consumption), and has a “core” version (stripped down, easy to teach and build upon). I discuss what we know about this new core and where more research is still needed.