This paper introduces agent heterogeneity, liquidity, and endogenous default to a DSGE framework. Our model allows for a comprehensive assessment of regulatory and monetary policy, as well as welfare analysis in the different sectors of the economy. Due to liquidity and endogenous default, the...

Ever since the Great Financial Crisis, if not before, it has become clear that there are complex interactions between the real and nominal sectors of the economy. When do monetary and financial policy goals conflict with each other? When is monetary policy a complement to or a substitute for...