Working Papers

2020-03 | November 2020

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The Transmission of Monetary Policy under the Microscope

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We investigate the transmission of monetary policy to household consumption using detailed administrative data on the universe of households in Norway. Based on a novel series of identified monetary policy shocks, we estimate the dynamic responses of consumption, income, and saving along the liquid asset distribution of households. We find that low-liquidity but also high-liquidity households show strong responses, interest rate changes faced by borrowers and savers feed into consumption, and indirect effects of monetary policy outweigh direct effects, albeit with a delay. Overall, the results support the importance of financial frictions, cash-flow channels, and heterogeneous effects of monetary policy.

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Article Citation

Holm, Martin Blomhoff, Pascal Paul, and Andreas Tischbirek. 2020. "The Transmission of Monetary Policy under the Microscope," Federal Reserve Bank of San Francisco Working Paper 2020-03. Available at https://doi.org/10.24148/wp2020-03