This paper analyzes the role of heterogeneous households in propagating shocks over the business cycle by generalizing a basic sticky-price model to allow for imperfect risk-sharing between households that differ in labor incomes. I show that imperfectly insured household consumption distorts...

We show that the extent of risk-sharing among heterogeneous workers is adeterminant of the degree of monetary non-neutrality in a multisector sticky-price model. Workers are employed in different sectors of the economy and, as a consequence, earn different wages. The inability of workers to...

This paper presents and estimates a sticky-price model with heterogenous households and financial frictions. Financial frictions lead to imperfect risk-sharing among households with idiosyncratic labor incomes. I study implications of imperfect risk-sharing for optimal monetary policy by...

This paper develops and estimates a multi-sector sticky-price model with heterogeneous households and incomplete markets. I show that household heterogeneity amplifies the persistence and volatility of business cycle fluctuations by generating strategic complementarities in firms' pricing...

This paper analyzes the role of heterogeneous households in propagating shocks over the business cycle by generalizing a basic sticky-price model to allow for imperfect risk-sharing between households that differ in labor incomes. I show that imperfectly insured household consumption distorts...

In September 2008, a six-year-old article about the 2002 bankruptcy of United Airlines’ parent company resurfaced on the Internet and was mistakenly believed to be reporting a new bankruptcy filing by the company. This episode caused the company’s stock price to drop by as much as 76 percent...