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...

The empirical evidence on how monetary policy affects inequality is mixed. We propose a model with endogenously segmented financial markets which can reconcile this contrasting em- pirical evidence. In addition to the conventional income composition channel (intensive margin), monetary policy in...