Monetary Policy and the Redistribution Channel

Auclert, Adrien

doi:10.3386/w23451

Cited by 146 publications

(130 citation statements)

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“…Instead, these households primarily rebalance their financial portfolios. Additionally, the focus of our paper differs from that of earlier papers studying monetary policy in the presence of incomplete markets (Gornemann et al, 2014;Auclert, 2014;McKay et al, 2015) in that we inspect the transmission mechanism of conventional monetary policy and decompose it into direct and indirect general equilibrium effects.…”

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confidence: 57%

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Monetary Policy According to HANK

2016

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We revisit the transmission mechanism of monetary policy for household consumption in a Heterogeneous Agent New Keynesian (HANK) model. The model yields empirically realistic distributions of household wealth and marginal propensities to consume because of two key features: multiple assets with different degrees of liquidity and an idiosyncratic income process with leptokurtic income changes. In this environment, the indirect effects of an unexpected cut in interest rates, which operate through a general equilibrium increase in labor demand, far outweigh direct effects such as intertemporal substitution. This finding is in stark contrast to small-and medium-scale Representative Agent New Keynesian (RANK) economies, where intertemporal substitution drives virtually all of the transmission from interest rates to consumption.

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confidence: 57%

“…However, these models also fea-5 See Guerrieri andLorenzoni (2011), Oh andReis (2012), Ravn and Sterk (2012), McKay and Reis (2013), Gornemann et al (2014), Auclert (2014), McKay et al (2015), Den Haan et al (2015, Bayer et al (2015), and Werning (2015).…”

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confidence: 99%

Monetary Policy According to HANK

2016

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“…6 For a more detailed discussion of these results, see Farhi and Werning (2016) and Chodorow-Reich (2017). 7 Auclert (2017) analyzes the redistribution channel from monetary policy to consumer spending. 8 See for example the work by Eggertsson (2011) and Christiano, Eichenbaum, and Rebelo (2011).…”

Section: Introductionmentioning

confidence: 99%

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Dupor¹,

Karabarbounis²,

Kudlyak³

et al. 2021

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We use regional variation in the American Recovery and Reinvestment Act (2009-2012) to analyze the effect of government spending on consumer spending. Our consumption data come from household-level retail purchases in Nielsen and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases consumer spending by $0.18. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, New Keynesian model with heterogeneous agents and incomplete markets. Our model successfully generates the estimated positive local multiplier, a result that distinguishes our incomplete markets model from models with complete markets. The aggregate consumption multiplier is 0.4, which implies an output multiplier higher than one. The aggregate consumption multiplier is almost twice the local estimate because trade linkages propagate government spending across regions.

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“…For example, Auclert (2017) shows that the effectiveness of monetary policy depends on household balance sheet exposure through the redistributive channels that interest rates can have. In Kaplan, Moll, and Violante (2017), the mechanism operates via the heterogeneity in marginal propensities to consume of households facing uninsurable income shocks in incomplete markets.…”

Section: Introductionmentioning

confidence: 99%

Effects of Quasi-Random Monetary Experiments

Jordà

Schularick

Taylor

2018

ERWP

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The trilemma of international finance explains why interest rates in countries that fix their exchange rates and allow unfettered cross-border capital flows are largely outside the monetary authority’s control. Using historical panel-data since 1870 and using the trilemma mechanism to construct an external instrument for exogenous monetary policy fluctuations, we show that monetary interventions have very different causal impacts, and hence implied inflation-output trade-offs, according to whether: (1) the economy is operating above or below potential; (2) inflation is low, thereby bringing nominal rates closer to the zero lower bound; and (3) there is a credit boom in mortgage markets. We use several adjustments to account for potential spillover effects including a novel control function approach. The results have important implications for monetary policy.

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Monetary Policy and the Redistribution Channel

Cited by 146 publications

References 0 publications

Monetary Policy According to HANK

Monetary Policy According to HANK

Regional Consumption Responses and the Aggregate Fiscal Multiplier

Effects of Quasi-Random Monetary Experiments

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