This paper examines the influence of financial constraints on the transmission of monetary policy shocks across heterogeneous firms. To this end, we develop a Dynamic Stochastic General Equilibrium (DSGE) model incorporating firm heterogeneity, nominal rigidity, and financial frictions....

I prove that in any linearized general equilibrium model with existence and uniqueness of equilibrium, any present response to a future shock always becomes weaker the further away the shock is. There is no forward guidance puzzle in any sensible general equilibrium model if forward guidance is...