Abstract
This paper provides an analytical decomposition of the fiscal multiplier in the Heterogeneous Agent New Keynesian model. The derived expression consists of interpretable, model-based channels through which private consumption propagates government spending shocks. The calibrated model is used to estimate the magnitude of multipliers and their structure under alternative fiscal and monetary rules. The derived formula is compared to its representative agent limit to articulate the role of household heterogeneity in the transmission of government spending shocks. A two-agent version of the model is investigated to explore the consequences of cyclical inequality for the propagation of fiscal expenditures.
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