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Monetary transmission channels, monetary regimes and consumption behaviour

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  • S. Sgherri

Abstract

This 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.

Suggested Citation

  • S. Sgherri, 1999. "Monetary transmission channels, monetary regimes and consumption behaviour," WO Research Memoranda (discontinued) 602, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:wormem:602
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    File URL: https://www.dnb.nl/binaries/wo0602_tcm46-145920.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Filippo Altissimo & Alberto Locarno & Stefano Siviero, 2002. "Dealing with forward-looking expectations and policy rules in quantifying the channels of transmission of monetary policy," Temi di discussione (Economic working papers) 460, Bank of Italy, Economic Research and International Relations Area.
    2. Ana María Iregui B. & Ligia Alba Melo B., 2009. "La transmisión de la política monetaria sobre el consumo en presencia de restricciones de liquidez," Borradores de Economia 547, Banco de la Republica de Colombia.
    3. McAdam, Peter & Morgan, Julian, 2001. "The monetary transmission mechanism at the euro-area level: issues and results using structural macroeconomic models," Working Paper Series 0093, European Central Bank.

    More about this item

    Keywords

    Consumption; monetary policy regimes; macroeconometric modelling.;

    JEL classification:

    • 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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