Demographics and Monetary Policy Shocks / Kimberly A. Berg, Chadwick C. Curtis, Steven Lugauer, Nelson C. Mark.

Format:

Book

Author/Creator:

Berg, Kimberly A.

Contributor:

National Bureau of Economic Research.

Curtis, Chadwick C.

Lugauer, Steven.

Mark, Nelson C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25970.

NBER working paper series no. w25970

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

We decompose the response of aggregate consumption to monetary policy shocks into contributions by households at different stages of the life cycle. This decomposition finds that older households have a higher consumption response than younger households. Amongst older households, the consumption response is also increasing in income. This, along with data on age-related net wealth, presents evidence for a wealth effect playing a role in driving the response patterns. This mechanism is studied further in a partial-equilibrium life-cycle model of consumption, saving, and labor-supply decisions. The model qualitatively explains the empirical patterns. Understanding the heterogeneity in consumption responses across age groups is important for understanding the transmission of monetary policy, especially as the U.S. population grows older.

Notes:

Print version record

June 2019.