How much inflation can fiscal policy create? Separating household heterogeneity and liquidity (opens in new tab)

A key determinant of monetary-fiscal interactions in Heterogeneous Agent New Keynesian (HANK) models is the liquidity value of public debt and its effect on interest rate dynamics. Yet, while household heterogeneity shapes this channel, it doesn't pin it down. In both analytically tractable and quantitative 2-asset HANK models, asset market assumptions unrelated to standard micro moments give rise to disparate implications of fiscal policy f...