Cover IMF Working Papers
Has Higher Household Indebtedness Weakened Monetary Policy Transmission?
Author:
Mr. R. G Gelos
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https://orcid.org/0000-0003-4362-676X
,
Mr. Tommaso Mancini Griffoli
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Mr. Machiko Narita
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Federico Grinbergnull

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,
Umang Rawatnull

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, and
Shujaat Khannull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 011
Language:
English
Publication Date:
15 Jan 2019
DOI:
https://doi.org/10.5089/9781484393208.001
ISBN:
9781484393208
ISSN:
1018-5941
Pages:
33
Keywords:
WP; monetary policy shock; basis point; Monetary policy; transmission; households; consumption; real estate; leverage; consumption growth; monetary policy transmission; monetary policy effectiveness; consumption response; monetary policy maker; Household consumption; Debt burden; Liquidity; Income; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Has monetary policy in advanced economies been less effective since the global financial crisis because of deteriorating household balance sheets? This paper examines the question using household data from the United States. It compares the responsiveness of household consumption to monetary policy shocks in the pre- and post-crisis periods, relating changes in monetary transmission to changes in household indebtedness and liquidity. The results show that the responsiveness of household consumption has diminished since the crisis. However, household balance sheets are not the culprit. Households with higher debt levels and lower shares of liquid assets are the most responsive to monetary policy, and the share of these households in the population grew. Other factors, such as economic uncertainty, appear to have played a bigger role in the decline of households’ responsiveness to monetary policy.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2019: Issue 011