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Monetary Policy over the Lifecycle

Author

Listed:
  • R. Anton Braun

    (Federal Reserve Bank of Atlanta (E-mail: r.anton.braun@gmail.com))

  • Daisuke Ikeda

    (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: daisuke.ikeda@boj.or.jp))

Abstract

A tighter monetary policy is generally associated with higher real interest rates on deposits and loans, weaker performance of equities and real estate, and slower growth in employment and wages. How does a household's exposure to monetary policy vary with its age? The size and composition of both household income and asset portfolios exhibit large variation over the lifecycle in Japanese data. We formulate an overlapping generations model that reproduces these observations and use it to analyze how household responses to monetary policy shocks vary over the lifecycle. Both the signs and the magnitudes of the responses of a household's net worth, disposable income and consumption depend on its age.

Suggested Citation

  • R. Anton Braun & Daisuke Ikeda, 2021. "Monetary Policy over the Lifecycle," IMES Discussion Paper Series 21-E-09, Institute for Monetary and Economic Studies, Bank of Japan.
  • Handle: RePEc:ime:imedps:21-e-09
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    File URL: https://www.imes.boj.or.jp/research/papers/english/21-E-09.pdf
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    1. Monetary Policy over the Lifecycle
      by Christian Zimmermann in NEP-DGE blog on 2021-09-23 19:32:42

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    More about this item

    Keywords

    Monetary policy; Lifecycle; Portfolio choice; Nominal government debt;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving

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