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Evaluating Macro Policies with Micro Data - The Effects of Monetary Policy at the Household Level

English title Evaluating Macro Policies with Micro Data - The Effects of Monetary Policy at the Household Level
Applicant Tischbirek Andreas
Number 189117
Funding scheme Project funding (Div. I-III)
Research institution Department of Economics (DEEP) Faculty of Business and Economics (HEC) University of Lausanne
Institution of higher education University of Lausanne - LA
Main discipline Economics
Start/End 01.02.2020 - 31.07.2021
Approved amount 89'629.00
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Keywords (4)

Monetary policy; Transmission mechanism; Micro data; Household heterogeneity

Lay Summary (German)

Die Effekte von geldpolitischen Zinsanpassungen werden grundsätzlich anhand von makroökonomischen Zeitreihen wie der Inflation, dem Bruttoinlandsprodukt oder dem gesamtwirtschaftlichen Konsum analysiert. Einzelne Haushalte sind jedoch unterschiedlich stark und aufgrund von verschiedenen Mechanismen von Zinsänderungen betroffen. Das Ziel des vorliegenden Projektes ist es, basierend auf Steuer- und Umfragedaten eine detaillierte Schätzung dieser Unterschiede zu erstellen und somit neue Erkenntnisse über die Wirkungsweise von Geldpolitik zu erlangen.
Lay summary

Die finanzielle Situation von Haushalten und somit ihr Konsum hängen sowohl direkt als auch indirekt vom geltenden Leitzins ab. Eine unerwartete Zinsänderung betrifft zum Beispiel Haushalte, die verschuldet sind, oder solche, die ihr Sparverhalten stark vom erzielbaren Zinserlös abhängig machen, unmittelbar. Andere Haushalte sind hauptsächlich durch die Effekte auf Löhne und weitere Bedingungen auf dem Arbeitsmarkt betroffen. Während theoretische Modelle in der Literatur zu finden sind, die in der Lage sind zu prognostizieren, welche Haushalte am stärksten auf geldpolitische Impulse reagieren, existiert wenig empirische Evidenz zu diesem Thema. Das Ziel dieser Studie ist es, anhand von detaillierten „Mikrodaten“ zu untersuchen, welche der theoretisch zu erwartenden Effekte tatsächlich zu beobachten sind, und welche der auftretenden Wirkungsweisen prägend für den Gesamteffekt sind.

Direct link to Lay Summary Last update: 22.10.2019

Responsible applicant and co-applicants


Name Institute

Project partner


The Transmission of Monetary Policy under the Microscope
Blomhoff Holm Martin, Paul Pascal, Tischbirek Andreas, The Transmission of Monetary Policy under the Microscope, in Journal of Political Economy.

Scientific events

Active participation

Title Type of contribution Title of article or contribution Date Place Persons involved
SED Annual Meeting Talk given at a conference The Transmission of Monetary Policy under the Microscope 03.07.2021 Minneapolis, United States of America Paul Pascal; Holm Martin; Tischbirek Andreas;
EABCN Conference on "Empirical Advances in Monetary Policy" joint with Banque de France and UPF Talk given at a conference The Transmission of Monetary Policy under the Microscope 27.10.2020 Paris, France Holm Martin; Tischbirek Andreas; Paul Pascal;
World Congress of the Econometric Society Talk given at a conference The Transmission of Monetary Policy under the Microscope 18.08.2020 Milan, Italy Holm Martin; Tischbirek Andreas; Paul Pascal;
NBER Sumer Institute Talk given at a conference The Transmission of Monetary Policy under the Microscope 09.07.2020 Boston, United States of America Tischbirek Andreas; Holm Martin; Paul Pascal;

Communication with the public

Communication Title Media Place Year
New media (web, blogs, podcasts, news feeds etc.) Monetary policy under the microscope: Household heterogeneity and consumption International 2020


Monetary policy is generally regarded as a central element in the attempts of policy makers to attenuate business-cycle fluctuations. According to the New Keynesian paradigm, central banks are able to stimulate or depress aggregate demand in the short run by adjusting their nominal interest rate targets. The effects of interest rate changes on aggregate consumption, the largest component of aggregate demand, are well understood in the context of this paradigm, on which the canonical ``workhorse'' model used in monetary policy analysis is grounded. A key feature of the model is that aggregate consumption is fully described by the amount of goods consumed by a representative household. A decline in the policy rate for instance implies that the real interest rate declines, the representative household saves less and hence increase its demand for consumption. At the same time, general equilibrium effects let labour income grow causing consumption to increase further. However, the mechanism outlined above ignores a considerable amount of empirically-observed heterogeneity among households. For example, households with a higher earnings elasticity to interest rate changes benefit more from a rate cut than those with a lower elasticity; households with large debt positions are at a relative advantage over households with large bond holdings; and households with low exposure to inflation are relatively better off than those holding a sizeable amount of nominal assets. As a result, the contribution to the aggregate consumption response differs substantially across households, implying that monetary expansions and tightenings produce relative ``winners'' and relative ``losers''.The aim of the project laid out in this proposal is to give a disaggregated account of the heterogeneous effects of monetary-policy induced interest rate changes on household consumption and a detailed analysis of the channels underlying them. Additionally, it seeks to draw conclusions about the determinants of the strength of the transmission mechanism of monetary policy. To do so, it relies on a large panel comprising detailed data from the universe of all households residing in Norway between 1993 and 2015 supplemented with additional micro-data provided by the European Commission. I will be assisted by two project partners, Pascal Paul who is a member of the Research Department of the Federal Reserve Bank of San Francisco and Martin Holm who is affiliated with the Research Unit of Statistics Norway and the University of Oslo. In addition, I would like to collaborate with and help train a doctoral student based at the University of Lausanne on this project.Existing empirical studies of the consumption response to monetary policy at the micro level rely on survey data. Therefore, they are subject to a number of severe data limitations. The surveys employed typically have either no or only a short panel dimension, suffer from attrition, include only limited information on income and wealth, are top-coded, and contain a significant amount of measurement error. The administrative data set provided to us by Statistics Norway suffers from none of these issues, implying that we are in a unique position to evaluate the household-level effects of policy rate changes. In a first step, we use forecasts published by the Norwegian central bank to derive monetary policy shocks that are robust to the simultaneity problem inherent in the identification of the effects of monetary policy following Romer and Romer (2004). We then confront the micro-data with the estimated shocks to study the consumption response along different segments of the income and wealth distribution and to test the importance of heterogeneity in labour earnings, financial income, liquid assets, inflation exposure and interest rate exposure among others. The findings will be of high relevance as they will not only allow us to evaluate channels hypothesised in the analytical literature, improve our understanding of the monetary policy transmission mechanism and its distributional consequences but also serve as a benchmark for structural models built both by theorists and practitioners.