Document Type

Working Paper

Publication Date

6-30-2026

Keywords

Household heterogeneity; Monetary policy; Corporate leverage; Phillips curve; Labor supply

Abstract

Corporate borrowing creates safe claims for some households and concentrates residual risk in equity for others. This portfolio heterogeneity drives a supply-side channel through which corporate leverage conditions monetary transmission. Tightening erodes equity holders’ wealth while safe-asset holders are cushioned; the resulting income effect makes aggregate labor fall more at high leverage, raising the sacrifice ratio. A static model yields a closed-form hump in leverage, with the US range on the rising side, disciplined by Survey of Consumer Finances portfolio shares. A calibrated dynamic model roughly doubles the sacrifice ratio, and US local projections agree in sign, shape, and timing.

Comments

JEL Classification Numbers: E31, E32, E52, G11, G51

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