This paper studies the role of the equity price channel in business cycle ∞uctuations, and highlights its systemic risk across all sectors of the economy. We develop a canonical New-Keynesian dynamic stochastic general equilibrium model with a tractable role for the equity market in banking, entrepreneur and household economic interactions. The model is estimated with Bayesian techniques using U.S. data over the sample period 1982Q01 i 2012Q01. We show that a NewKeynesian DSGE model with an equity price channel well mimics the U.S. business cycle. Moreover, the equity price channel signiflcantly exacerbates business cycle ∞uctuations through both the flnancial accelerator and bank funding channels. This study highlights the equity price channel as a difierent aspect to general equilibrium models with flnancial frictions, and emphasizes the consequences of the (in)stability of flnancial markets on the real economy.