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. The model enlarges the set of shocks and...

Using kernel density estimation we find that over their 1990s business cycles the entire distribution of after-tax (disposable) income moved to the right in the United States and Great Britain while inequality declined. In contrast, Germany and Japan experienced less growth, a rise in inequality...