Monetary transmission channels, monetary regimes and consumption behaviour
AbstractThis paper explores the characteristics of the monetary transmission mechanism in the UK, as portrayed by the National Institute's Domestic Econometric Model (NiDEM). Sensitivity to different monetary policy regimes and to alternative models of consumers' expenditure is assessed. The methodology adopted quantifies not only the total impact of a temporary monetary shock on the main GDP components, but also the contributions of the various transmission channels. Our analysis supports the evidence that the interest sensitivity of consumption becomes significantly lower when consumers `excessively discount' the future. More interestingly, we note that monetary shocks have relatively large effects on the real economy through their repercussions on fiscal variables; this is more obvious when the exchange rate is fixed and departures from Ricardian equivalence are enhanced.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 602.
Date of creation: 1999
Date of revision:
Consumption; monetary policy regimes; macroeconometric modelling.;
Other versions of this item:
- S. Sgherri, 2000. "Monetary Transmission Channels, Monetary Regimes and ConsumptionBehaviour," DNB Staff Reports (discontinued) 53, Netherlands Central Bank.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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