Mpc Heterogeneity in Europe: Sources and Policy Implications

46 Pages Posted: 24 Sep 2018 Last revised: 15 Jul 2022

See all articles by Miguel Ampudia

Miguel Ampudia

European Central Bank (ECB) - Directorate General Research

Russell Cooper

Pennsylvania State University, College of the Liberal Arts - Department of Economic

Julia Le Blanc

Joint Research Centre, Italy

Guozhong Zhu

University of Alberta - Department of Marketing, Business Economics & Law

Date Written: September 2018

Abstract

This paper studies the implications of household financial choices for the effects of monetary policy on consumption. Based on data from four major euro area countries, the paper estimates the key structural parameters using a simulated method of moments approach to match moments related to asset market participation rates, portfolio shares and wealth to income ratios by education and country. The policy functions based upon the estimation are used to characterize the distributions of the marginal propensity to consume across heterogenous households for each of the four countries. Due to this heterogeneity in consumption responses, monetary policy, operating through its effects on household income and asset market returns, has a differential impact on individuals within and across countries. Generally, poor households respond more to the income variations produced by monetary policy innovations while rich households respond more to policy-induced variations in stock returns. Monetary policy has a larger impact on consumption in Italy and Spain compared to France and Germany.

Suggested Citation

Ampudia, Miguel and Cooper, Russell and Le Blanc, Julia and Zhu, Guozhong, Mpc Heterogeneity in Europe: Sources and Policy Implications (September 2018). NBER Working Paper No. w25082, Available at SSRN: https://ssrn.com/abstract=3254076

Miguel Ampudia (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Russell Cooper

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States

Julia Le Blanc

Joint Research Centre, Italy ( email )

Via E. Fermi 1
I-21020 Ispra (VA)
United States

Guozhong Zhu

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada

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