Demographics and Monetary Policy Shocks

Kimberly Berg, Chadwick Curtis, Steven Lugauer and Nelson Mark

Journal of Money, Credit and Banking, 2021, vol. 53, issue 6, 1229-1266

Abstract: We show that consumption expenditures for older households are more responsive to monetary policy shocks than for young‐ or middle‐aged households. A one‐standard‐deviation expansionary monetary policy shock induces a statistically significant and quantitatively large (1.7%) increase in aggregate consumption for old households over the ensuing 3 years. The responses for young‐ and middle‐aged households are smaller and not statistically significant. We also present evidence, suggesting that life‐cycle wealth effects play a role in driving the responses. We then build the wealth mechanism into a partial equilibrium life‐cycle model, which can qualitatively match the empirical patterns.

Date: 2021
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Citations: View citations in EconPapers (4)

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https://doi.org/10.1111/jmcb.12825

Related works:
Working Paper: Demographics and Monetary Policy Shocks (2019)
Working Paper: Demographics and Monetary Policy Shocks (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:53:y:2021:i:6:p:1229-1266

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