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Differences in Euro-Area Household Finances and their Relevance for Monetary-Policy Transmission

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  • Thomas Hintermaier
  • Winfried Koeniger

Abstract

This paper quantifies mechanisms through which heterogeneity in household finances affects the transmission of monetary policy, considering housing tenure choices over the life cycle. Our analysis focuses on the four largest economies in the euro area: France, Germany, Italy, and Spain. Across these countries, we find that responses of consumption to changes in the real interest rate and in house prices differ substantially. Our analysis links the differences in the aggregate responses to the underlying heterogeneity in household characteristics such as age, housing tenure, and asset positions. We quantify how the size of the responses depends on household expectations about future financing conditions affected by forward guidance.

Suggested Citation

  • Thomas Hintermaier & Winfried Koeniger, 2018. "Differences in Euro-Area Household Finances and their Relevance for Monetary-Policy Transmission," CESifo Working Paper Series 7088, CESifo.
  • Handle: RePEc:ces:ceswps:_7088
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    Citations

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    Cited by:

    1. Fleck, Johannes & Monninger, Adrian, 2020. "Culture and portfolios: trust, precautionary savings and home ownership," Working Paper Series 2457, European Central Bank.
    2. Koeniger, Winfried & Lennartz, Benedikt & Ramelet, Marc-Antoine, 2022. "On the transmission of monetary policy to the housing market," European Economic Review, Elsevier, vol. 145(C).
    3. Koeniger, Winfried & Lennartz, Benedikt & Ramelet, Marc-Antoine, 2022. "On the transmission of monetary policy to the housing market," European Economic Review, Elsevier, vol. 145(C).
    4. Miguel Ampudia & Russell Cooper & Julia Le Blanc & Guozhong Zhu, 2018. "MPC Heterogeneity in Europe: Sources and Policy Implications," NBER Working Papers 25082, National Bureau of Economic Research, Inc.
    5. Slacalek, Jiri & Tristani, Oreste & Violante, Giovanni L., 2020. "Household balance sheet channels of monetary policy: A back of the envelope calculation for the euro area," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    6. Luetticke, Ralph, 2020. "Comment on “The Household Channel of Monetary Policy in the Euro Area: A Back of the Envelope Calculation”," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    7. Sigal Ribon, 2020. "Differential Effects of Monetary Policy on Household Consumption: The Case of Israel," Bank of Israel Working Papers 2020.12, Bank of Israel.

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    More about this item

    Keywords

    consumption; household portfolios; housing; monetary policy transmission; forward guidance;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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