The effects of increasing income and wealth disparities – specifically, the stagnating wages and sharp increase in household debt in the years leading up to the crisis, combined with the rapid decline in house prices and contraction in credit that followed – may have resulted in dynamics that differ from historical experience and which are therefore not well captured by aggregate models.
Almost all households own financial assets, even if their value is typically only a small fraction of the value of their real estate holdings. [7] These dimensions of household heterogeneity clearly matter for the exposure of individual households to monetary policy decisions.