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One Size Fits All? Monetary Policy And Asymmetric Household Debt Cycles In Us States

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  • Bruno Albuquerque

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Abstract

I investigate the extent to which a common US monetary policy affects regional asymmetries through different household debt levels across states. After constructing a novel indicator of consumer prices at the state level, I compute a state-specific monetary policy stance measure as deviations from an aggregate Taylor rule for a panel of 30 states. Using local projection methods over 1999-2015, I find that a common monetary policy contributes to amplifying regional asymmetries. While a looser monetary policy stance stimulates borrowing and growth in states with low household debt, it is only the case in the short term for high debt states: household debt and real GDP decline over the medium to longer run in high debt states.

Suggested Citation

  • Bruno Albuquerque, 2017. "One Size Fits All? Monetary Policy And Asymmetric Household Debt Cycles In Us States," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 17/937, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:17/937
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    File URL: http://wps-feb.ugent.be/Papers/wp_17_937.pdf
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    References listed on IDEAS

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    1. Adrian, Tobias & Duarte, Fernando M., 2016. "Financial vulnerability and monetary policy," Staff Reports 804, Federal Reserve Bank of New York, revised 01 Sep 2017.
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    8. Serdar Ozkan & Kurt Mitman & Fatih Karahan & Aaron Hedlund, 2016. "Monetary Policy, Heterogeneity and the Housing Channel," 2016 Meeting Papers 663, Society for Economic Dynamics.
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    Cited by:

    1. repec:bis:bisqtr:1712e is not listed on IDEAS
    2. Marco Bernardini & Selien De Schryder & Gert Peersman, 2017. "Heterogeneous Government Spending Multipliers In The Era Surrounding The Great Recession," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 17/941, Ghent University, Faculty of Economics and Business Administration.

    More about this item

    Keywords

    Monetary policy; Household debt; Regional asymmetries; Local Projections; Taylor rule;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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