"The present paper studies optimal monetary policy when the representative agent assumption is abandoned and financial wealth heterogeneity across households is introduced. Incomplete markets make households incapable of perfectly insuring against interest rate and inflation risk, creating a...

We use the term structure of bank CD rates to examine whether maturity-transformation risk is priced into the rates banks offer customers. We find that depositors pay a significant cost for the liquidity provided by bank deposits. This cost is strongly related to the amount of...