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Differences in Euro-Area Household Finances and their Relevance for Monetary-Policy Transmission
Type
working paper
Date Issued
2018-05
Author(s)
Hintermaier, Thomas
Abstract
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 liquid financial asset and illiquid 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 the analyzed countries, and across age groups within these countries. The different consumption responses quantified in this paper point towards important heterogeneity in monetary-policy transmission within the euro area.
Language
English
Keywords
European household portfolios
consumption
monetary policy transmission
international comparative finance
housing
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Publisher
CESifo Working Paper No. 7088, University of St.Gallen SEPS Working Paper No. 2018-06
Pages
61
Subject(s)
Division(s)
Eprints ID
254931