Quantitative easing with heterogeneous agents

•This paper studies Quantitative Easing in a Heterogeneous-Agents New Keynesian model with liquidity frictions.•The macroeconomic effects of QE crucially depend on the difference in Marginal Propensities to Consume out of liquid and illiquid wealth.•QE can have powerful effects on aggregate demand by expanding household liquidity.•However, it can also create strong side effects which may exacerbate inequality across households. The redistribution effect is in sharp contrast with conventional monetary policy.