What effect do financial intermediaries have on the economy? We develop a strategy to isolate the effects of financial shocks on the economy using high-frequency data. Our findings show that intermediaries have a sizeable impact on nonfinancial firms—particularly those with high default risk and low liquidity.
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.
