We investigate the redistributive effects of a disinflation experiment in an otherwise standard medium-scale DSGE model augmented for Limited Asset Market Participation, implying that a fraction of households does not hold any wealth. We highlight two key mechanisms driving consumption and...

This paper shows that a medium-scale DSGE model is able to explain a contemporaneous reduction of output and consumption during a disinflation policy, as it is in the empirical evidence. To this aim, we introduce Rotemberg (1982) adjustment costs and the limited asset market participation assumption