Durability, essentiality, and the transmission of monetary policy to household consumption

Johannes Gareis and Ryan Minasian

No 3127, Working Paper Series from European Central Bank

Abstract: In this paper, we examine how different household consumption items respond to monetary policy shocks in the euro area. Specifically, we classify household consumption along two key dimensions: durability and essentiality. Our findings reveal pronounced heterogeneity in responses across these dimensions. First, durable items are highly sensitive to monetary policy shocks, whereas non-durable items exhibit weaker responses. Second, non-essential items react more strongly than essential items. Finally, we demonstrate that durability and essentiality each independently shape the sensitivity of household consumption to monetary policy shocks, with durable non-essential items being most strongly affected. JEL Classification: E21, E52, E44, E32, C23

Keywords: durability; essentiality; household consumption; monetary policy shocks; monetary policy transmission (search for similar items in EconPapers)
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253127

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