address the following questions. How are macroeconomic shocks transmitted to bank risk and other banking variables? What are … the sources of bank heterogeneity, and what explains differences in individual banks' responses to macroeconomic shocks …? Our paper has two main findings: (i) Average bank risk declines, and average bank lending increases following expansionary …

This paper proposes a novel mechanism by which changes in the distribution of money holdings have real effects … through the dependence of optimal markups on the heterogeneity of money holdings. Because varieties of consumption bundles are … purchased sequentially, newly injected money disseminates slowly throughout the economy via second-round effects. The model …

to a fall in output, monetary aggregates, and factor prices. In contrast to an alternative model specification with money …