Transmission of Monetary Policy with Heterogeneity in Household Portfolios

Principal Investigator(s):  View help for Principal Investigator(s) Ralph Luetticke, University College London

Version:  View help for Version V1

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  public_code 03/06/2020 03:27:PM
  public_empirics 04/07/2020 07:39:AM
LISTFILES.pdf application/pdf 102.6 KB 03/07/2020 01:53:AM
README.pdf application/pdf 178.6 KB 04/23/2020 05:41:AM
online_appendix.pdf application/pdf 806 KB 03/07/2020 01:58:AM

Project Citation: 

Luetticke, Ralph. Transmission of Monetary Policy with Heterogeneity in Household Portfolios. Nashville, TN: American Economic Association [publisher], 2021. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2021-03-18. https://doi.org/10.3886/E117644V1

Project Description

Summary:  View help for Summary
This paper assesses the importance of heterogeneity in household portfolios for the transmission of monetary policy in a New Keyne- sian business cycle model with uninsurable income risk and assets with different liquidity. In this environment, monetary transmis- sion works through investment, but redistribution lowers the elas- ticity of investment via two channels: 1) heterogeneity in marginal propensities to invest, 2) time variation in the liquidity premium. Monetary contractions redistribute to wealthy households who have high propensities to invest and a low marginal value of liquidity, thereby stabilizing investment. I provide empirical evidence for counter-cyclical liquidity premia and heterogeneity in household portfolio responses.

Scope of Project

Subject Terms:  View help for Subject Terms monetary policy; general equilibrium; heterogeneous agents
JEL Classification:  View help for JEL Classification
      E21 Macroeconomics: Consumption; Saving; Wealth
      E32 Business Fluctuations; Cycles
      E52 Monetary Policy
Data Type(s):  View help for Data Type(s) aggregate data; observational data; program source code


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V1 [2021-03-18]

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