Households' income heterogeneity is important to explain consumption dynamics in response to aggregate macro uncertainty: an increase in uncertainty generates a consumption drop that is stronger for income poorer households. At the same time, labor markets are strongly responsive to macro...

We study whether the source of uncertainty shocks matters for optimal monetary policy, focusing on productivity and cost-push uncertainty shocks. Although both shocks deliver similar macroeconomic dynamics under an empirical Taylor rule, they generate very different dynamics under optimal...

Households' income heterogeneity is important to explain consumption dynamics in response to aggregate macro uncertainty: an increase in uncertainty generates a consumption drop that is stronger for income poorer households. At the same time, labor markets are strongly responsive to macro...