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

63 Pages Posted: 17 Dec 2019

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


This paper quantifies the extent of heterogeneity in consumption responses to changes in real interest rates and house prices in the four largest economies in the euro area: France, Germany, Italy, and Spain. We first calibrate a life-cycle incomplete-markets model with a financial asset and housing to match the large heterogeneity of households asset portfolios, observed in the Household Finance and Consumption Survey (HFCS) for these countries. We then show that the heterogeneity in household finances implies that responses of consumption to changes in the real interest rate and in house prices differ substantially across countries, and within countries by household characteristics such as age, housing tenure, and asset positions. The different consumption responses quantified in this paper point towards important heterogeneity in monetary-policy transmission in the euro area.

Keywords: European Household Portfolios, Consumption, Monetary Policy Transmission, International Comparative Finance, Housing

JEL Classification: D14, D15, D31, E21, E43, G11

Suggested Citation

Hintermaier, Thomas and Koeniger, Winfried, Differences in Euro-Area Household Finances and their Relevance for Monetary-Policy Transmission (November 1, 2019). CFS Working Paper, No. 637, 2019, Available at SSRN: https://ssrn.com/abstract=3496302 or http://dx.doi.org/10.2139/ssrn.3496302

Thomas Hintermaier

University of Bonn ( email )

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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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Swiss Finance Institute ( email )

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