scholarly journals Lumpy Durable Consumption Demand and the Limited Ammunition of Monetary Policy

2019 ◽  
Author(s):  
Alisdair McKay ◽  
Johannes Wieland
Keyword(s):  
Monetary Policy ◽  
Durable Consumption ◽  
Consumption Demand

scholarly journals Lumpy Durable Consumption Demand and the Limited Ammunition of Monetary Policy

2021 ◽  
Author(s):  
Alisdair McKay ◽  
Johannes F. Wieland
Keyword(s):  
Monetary Policy ◽  
Durable Consumption ◽  
Consumption Demand

scholarly journals Lumpy Durable Consumption Demand and the Limited Ammunition of Monetary Policy

Econometrica ◽  
2021 ◽  
Vol 89 (6) ◽  
pp. 2717-2749
Author(s):  
Alisdair McKay ◽  
Johannes F. Wieland
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Durable Goods ◽  
Cost Model ◽  
Aggregate Demand ◽  
Fixed Cost ◽  
Natural Rate ◽  
Durable Consumption ◽  
Natural Rate Of Interest ◽  
Consumption Demand

The prevailing neo‐Wicksellian view holds that the central bank's objective is to track the natural rate of interest ( r *), which itself is largely exogenous to monetary policy. We challenge this view using a fixed‐cost model of durable consumption demand, in which expansionary monetary policy prompts households to accelerate purchases of durable goods. This yields an intertemporal trade‐off in aggregate demand as encouraging households to increase durable holdings today leaves fewer households acquiring durables going forward. Interest rates must be kept low to support demand going forward, so accommodative monetary policy today reduces r * in the future. We show that this mechanism is quantitatively important in explaining the persistently low level of real interest rates and r * after the Great Recession.

scholarly journals Fiscal Foundations of Inflation: Imperfect Knowledge

2018 ◽  
Vol 108 (9) ◽  
pp. 2551-2589 ◽  
Author(s):  
Stefano Eusepi ◽  
Bruce Preston
Keyword(s):  
Monetary Policy ◽  
Public Debt ◽  
Wealth Effects ◽  
Inflation Expectations ◽  
Ricardian Equivalence ◽  
The Public ◽  
Us Economy ◽  
The Us ◽  
Imperfect Knowledge ◽  
Consumption Demand

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. Because imperfect knowledge breaks Ricardian equivalence, the scale and composition of the public debt matter for inflation. High and moderate duration debt generates wealth effects on consumption demand that impairs the intertemporal substitution channel of monetary policy: aggressive monetary policy is required to anchor inflation expectations. Counterfactual experiments conducted in an estimated model reveal that the US economy would have been substantially more volatile over the Great Inflation and Great Moderation periods if US debt levels had been those observed in Italy or Japan. (JEL D84, E31, E32, E52, E62, H63)

scholarly journals Monetary Policy Transmission to Consumer Financial Stress and Durable Consumption

2019 ◽  
Author(s):  
Dimitris Georgarakos ◽  
Konstantinos Tatsiramos
Keyword(s):  
Monetary Policy ◽  
Financial Stress ◽  
Monetary Policy Transmission ◽  
Durable Consumption ◽  
Policy Transmission

scholarly journals Optimal monetary policy with durable consumption goods

2006 ◽  
Vol 53 (7) ◽  
pp. 1341-1359 ◽  
Author(s):  
Christopher Erceg ◽  
Andrew Levin
Keyword(s):  
Monetary Policy ◽  
Optimal Monetary Policy ◽  
Durable Consumption ◽  
Consumption Goods

scholarly journals Monetary Policy Transmission to Consumer Financial Stress and Durable Consumption

2019 ◽  
Author(s):  
Dimitris Georgarakos ◽  
Konstantinos Tatsiramos
Keyword(s):  
Monetary Policy ◽  
Financial Stress ◽  
Monetary Policy Transmission ◽  
Durable Consumption ◽  
Policy Transmission

Imperfect Knowledge and Monetary Policy

2006 ◽  
Author(s):  
Vítor Gaspar ◽  
Otmar Issing ◽  
Oreste Tristani ◽  
David Vestin
Keyword(s):  
Monetary Policy ◽  
Imperfect Knowledge
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