This paper studies monetary and fiscal policy transmission in a multi-sector heterogeneous-agent
New Keynesian model with an input-output network (“HANK-IO”). We document systematic
household-sector linkages in micro data and calibrate our model to match them. To identify
when these linkages have implications for policy transmission, we analytically characterize an
as-if benchmark that features a strict decoupling between household and sectoral heterogeneity.
Away from this benchmark, novel earnings and expenditure heterogeneity channels emerge that
govern the propagation of demand and supply shocks. Quantitatively, these channels shape
the transmission of stabilization policy to aggregates, as well as its distributional and sectoral
consequences.