We build an agent-based model to study how coordination failures, credit constraints and unequal access to investment opportunities affect inequality and aggregate income dynamics. The economy is populated by households who can invest in alternative projects associated with different...

We provide evidence that expansionary fiscal policy lowers return differences between public debt and less liquid assets-the liquidity premium. We rationalize this finding in an estimated heterogeneous-agent New-Keynesian model with incomplete markets and portfolio choice, in which public debt...

Germany introduced a new fiscal rule, the ‘debt brake’, after the Global Financial Crisis and since then experienced a strong decline in its public debt to GDP ratio until the coronavirus pandemic struck. The past ten years and the reaction to the current crisis in Germany illustrate the...