This paper examines the effects of changes in uncertainty of household income on the macroeconomy. Households face substantial idiosyncratic income risk that is up to two orders of magnitude larger than total factor productivity uncertainty, very persistent and varies substantially over the...

We introduce frictional financial intermediation into a HANK model. Households are subject to idiosyncratic and aggregate risk and smooth consumption through savings and consumer loans intermediated by banks. The banking friction introduces an endogenous countercyclical spread between the...

We introduce frictional financial intermediation into a HANK model. Households are subject to idiosyncratic and aggregate risk and smooth consumption through savings and consumer loans intermediated by banks. The banking friction introduces an endogenous countercyclical spread between the...

Consumer credit spreads significantly impact consumption and asset dynamics, affecting indebted households' spending behavior and the income sensitivity of consumption. Analyzing Danish data, we find that elevated credit spreads reduce consumption of indebted households. Our results suggest that...