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ONE SIZE FITS ALL? MONETARY POLICY AND ASYMMETRIC HOUSEHOLD DEBT CYCLES IN US STATES

Bruno Albuquerque ()

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: I investigate the extent to which a common US monetary policy affects regional asymmetries through different household debt levels across states. After constructing a novel indicator of consumer prices at the state level, I compute a state-specific monetary policy stance measure as deviations from an aggregate Taylor rule for a panel of 30 states. Using local projection methods over 1999-2015, I find that a common monetary policy contributes to amplifying regional asymmetries. While a looser monetary policy stance stimulates borrowing and growth in states with low household debt, it is only the case in the short term for high debt states: household debt and real GDP decline over the medium to longer run in high debt states.

Keywords: Monetary policy; Household debt; Regional asymmetries; Local Projections; Taylor rule (search for similar items in EconPapers)
JEL-codes: C33 E32 E52 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
Date: 2017-05
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Persistent link: http://EconPapers.repec.org/RePEc:rug:rugwps:17/937

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