We argue that a 2-agent version of the standard New Keynesian model—where a “worker” receives only labor income and a “capitalist” only profit income— offers insights about how income inequality affects the monetary transmission mechanism. Under rigid prices, monetary policy affects...

A stable relationship between monetary policy rates and bank lending and deposit rates faced by consumers and companies is essential for the effective transmission of monetary policy decisions. This paper studies how changes in the policy rate set by the Swedish central bank, the Riksbank, have...