@article{Ferlaino2024a,
	author = {Ferlaino, Francesco},
	title = {Effects of different financial frictions on households},
	year   = {2024},
	Journal = {Working paper},
	number = {}
	abstract = {The objective of this paper is to investigate the impact of different types of financial frictions on households' wealth and consumption following a contractionary monetary policy shock. The analysis focuses on two types of frictions: frictions on production firms and frictions on households' borrowing ability, both of which are incorporated into a HANK model. The findings indicate that the friction in the productive sector has a greater effect on wealth inequality, while the friction on household loans leads to a higher dispersion of consumption compared to the counterfactual scenario. These two dynamics are found to be interconnected. In the model with frictions on household borrowings, households are discouraged from moving towards the lower end of the wealth distribution, resulting in reduced borrowing and consequently lower consumption capacity. Conversely, when there is an active friction on the production side of the economy, more households are pushed towards the lower end of the distribution. This fluctuation increases the Gini index of wealth, but at the same time enables greater economy-wide consumption smoothing, thereby reducing consumption inequality compared to the previous case.},
}