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The Liquidity Channel of Fiscal Policy

We provide evidence that expansionary fiscal policy lowers return differences be- tween public debt and less liquid assets—the liquidity premium. We rationalize this finding in an estimated heterogeneous-agent New-Keynesian model with incomplete …

Financial Frictions: Macro vs Micro Volatility

We examine the impact of frictional financial intermediation in a HANK model. An incentive problem restricts banking sector leverage and gives rise to an equilibrium spread between the returns on savings and debt. The size of this spread impacts on …

The Coronavirus Stimulus Package: How large is the transfer multiplier?

In response to the COVID-19 pandemic, large parts of the economy have been locked down and, as a result, households' income risk has risen sharply. At the same time, policy makers have put forward the largest stimulus package in history. In the U.S., …

Shocks, Frictions, and Inequality in US Business Cycles

How much does inequality matter for the business cycle and vice versa? Using a Bayesian likelihood approach, we estimate a heterogeneous-agent New-Keynesian (HANK) model with incomplete markets and portfolio choice between liquid and illiquid assets. …