This paper investigates the interactions between stock market fluctuations and monetary
policy within a DSGE model for the US economy. First, we design a framework in which
fluctuations in households financial wealth are allowed—but not necessarily required—to
exert an impact on current consumption. This is due to the interaction, in the financial
markets, of long-time traders holding wealth accumulated over time with newcomers holding
no wealth at all. Importantly, we introduce nominal wage stickiness to induce pro-cyclicality …