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