The labor market is one of the key mediators of business cycle fluctuations and interacts with asset market incompleteness and household heterogeneity in several ways: In particular, higher and unequal unemployment incidence will affect both consumption- and investment demand through precautionary savings motives and limited possibilities for intertemporal substitution upon job losses.

To evaluate the importance of the various mechanisms as well as their policy implications, we propose a quantitative 2-asset Heterogeneous Agents New Keynesian (HANK) model with Search-and-Matching frictions on the labor market. The framework features endogenous wage determination based on an Alternative Offer Bargaining protocol.  As an application, the heterogenous impact of inflationary supply shocks under different monetary policy rules is studied using a preliminary calibration.