Premium
One Size Fits All? Monetary Policy and Asymmetric Household Debt Cycles in U.S. States
Author(s) -
ALBUQUERQUE BRUNO
Publication year - 2019
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12547
Subject(s) - economics , monetary policy , debt , monetary economics , inflation (cosmology) , household debt , recession , inflation targeting , macroeconomics , physics , theoretical physics
I investigate the nonlinear effects of monetary policy through differences in household debt across U.S. states. After constructing a novel indicator of inflation for the states, I compute state‐specific monetary policy stances as deviations from an aggregate Taylor rule. I find that the effectiveness of monetary policy is curtailed during periods of large household debt imbalances. Moreover, a common U.S. monetary policy does not fit all ; it may have asymmetric effects on the economic performance across states, particularly at times of high dispersion in the household debt imbalances, as it may have been the case around the Great Recession.