Prior to the Great Recession the majority of macroeconomic research treated the financial sector as a veil. Financial frictions were considered as less important than price and wage rigidities. The global financial crisis triggered by the Lehman collapse clearly revealed the centrality of the financial sector for a well-functioning economy. The subsequent European debt crisis and slump led to an increased focus on financial frictions - and the financial sector's role in mitigating them. In light of this shift, the overall financial architecture as well as the transmission mechanism of both fiscal and monetary interventions have to be rethought.