One Size Fits All? Monetary Policy and Asymmetric Household Debt Cycles in U.S. States

Bruno Albuquerque

Journal of Money, Credit and Banking, 2019, vol. 51, issue 5, 1309-1353

Abstract: I investigate the nonlinear effects of monetary policy through differences in household debt across U.S. states. After constructing a novel indicator of inflation for the states, I compute state‐specific monetary policy stances as deviations from an aggregate Taylor rule. I find that the effectiveness of monetary policy is curtailed during periods of large household debt imbalances. Moreover, a common U.S. monetary policy does not fit all; it may have asymmetric effects on the economic performance across states, particularly at times of high dispersion in the household debt imbalances, as it may have been the case around the Great Recession.

Date: 2019
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https://doi.org/10.1111/jmcb.12547

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Working Paper: ONE SIZE FITS ALL? MONETARY POLICY AND ASYMMETRIC HOUSEHOLD DEBT CYCLES IN US STATES (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:51:y:2019:i:5:p:1309-1353

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