The Transmission of Monetary Policy under the Microscope

Martin Holm, Pascal Paul and Andreas Tischbirek

No 2020-03, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We investigate the transmission of monetary policy to household consumption using detailed administrative data on the universe of households in Norway. Based on a novel series of identified monetary policy shocks, we estimate the dynamic responses of consumption, income, and saving along the liquid asset distribution of households. We find that low-liquidity but also high-liquidity households show strong responses, interest rate changes faced by borrowers and savers feed into consumption, and indirect effects of monetary policy outweigh direct effects, albeit with a delay. Overall, the results support the importance of financial frictions, cash-flow channels, and heterogeneous effects of monetary policy.

Keywords: Monetary policy; Household balance sheets; Liquidity constraints; Heterogeneous agent New Keynesian models (search for similar items in EconPapers)
JEL-codes: D31 E12 E21 E24 E32 E43 E52 (search for similar items in EconPapers)
Pages: 87
Date: 2020-01-31
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-mac, nep-mon and nep-ore
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Citations: View citations in EconPapers (17)

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Journal Article: The Transmission of Monetary Policy under the Microscope (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:87419

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DOI: 10.24148/wp2020-03

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