We provide empirical evidence of effects to the aggregate economy from surprises about financial intermediaries’ net worth based on a high-frequency identification strategy. We estimate that news of a 1% decline in intermediaries’ net worth leads to a 0.2%–0.4% decrease in the market value of nonfinancial firms.
We study how different types of monetary policy shape the distributional effects of external economic shocks on households’ consumption in a small open economy. Our results present a trade-off between maintaining overall stabilization and controlling consumption inequality.
