Differences in Euro-Area Household Finances and Their Relevance for Monetary-Policy Transmission

76 Pages Posted: 22 Jul 2018

See all articles by Thomas Hintermaier

Thomas Hintermaier

University of Bonn

Winfried Koeniger

University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute); Center for Financial Studies (CFS); IZA Institute of Labor Economics; Swiss Finance Institute

Date Written: November 1, 2019

Abstract

This paper quantifies mechanisms through which heterogeneity in household finances affects the transmission of monetary policy, considering housing tenure choices over the life cycle. Our analysis focuses on the four largest economies in the euro area: France, Germany, Italy, and Spain. Across these countries, we find that responses of consumption to changes in the real interest rate and in house prices differ substantially. Our analysis links the differences in the aggregate responses to the underlying heterogeneity in household characteristics such as age, housing tenure, and asset positions. We quantify how the size of the responses depends on household expectations about future financing conditions affected by forward guidance.

Keywords: consumption, household portfolios, housing, monetary policy transmission, forward guidance

JEL Classification: D140, D150, D310, E210, E430, G110

Suggested Citation

Hintermaier, Thomas and Koeniger, Winfried, Differences in Euro-Area Household Finances and Their Relevance for Monetary-Policy Transmission (November 1, 2019). CESifo Working Paper Series No. 7088, Available at SSRN: https://ssrn.com/abstract=3215089 or http://dx.doi.org/10.2139/ssrn.3215089

Thomas Hintermaier

University of Bonn ( email )

Regina-Pacis-Weg 3
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Bonn, D-53012
Germany

Winfried Koeniger (Contact Author)

University of St. Gallen ( email )

Swiss Institute for Empirical Economic Research
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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Center for Financial Studies (CFS) ( email )

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IZA Institute of Labor Economics ( email )

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Swiss Finance Institute ( email )

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Switzerland

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