How much does inequality matter for the business cycle and vice versa? Using a Bayesian likelihood approach, we estimate a heterogeneous-agent New-Keynesian (HANK) model with incomplete markets and portfolio choice between liquid and illiquid assets. The model enlarges the set of shocks and...

This paper analyzes the role of income distribution in macroeonomic analysis. The study demonstrates that the long-run equilibrium depends on the initial distribution of income. In accordance with empirical evidence concerning the correlation between income distribution and output, an economy...