We study whether the effects of monetary policy are dependent on

the age structure of the population. We exploit cross-sectional variation in

the response of US states to an identified monetary policy shock. We find

that there are three distinct age groups. In response to an increase in

interest rates, the responses of private employment and personal income are

weaker the greater the share of population under 35 years of age, are

stronger the greater the share between 40 and 65 years of age, and are

relatively unaffected by the share older than 65 years. We find that all age

groups become more responsive to monetary policy shocks when the proportion

of middle aged increases. We provide evidence consistent with middle aged

entrepreneurs starting and expanding businesses in response to an

expansionary monetary shock.

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