Emilia Garcia-Appendini, Steven Ongena, 14 September 2021

Firms may face bottlenecks forcing them to cut activity and adjust prices when monetary tightening financially constrains their business partners. This column focuses on firms producing intermediate goods in the US to show how monetary policy can have ‘ripple effects’ along supply chains through input-output linkages involving financially constrained firms. These transmission channels of monetary policy may be especially relevant in the post-Covid context of higher corporate leverage, significant supply chain disruptions, and inflationary pressures.

Gaston Gelos, Federico Grinberg, Shujaat Khan, Tommaso Mancini-Griffoli, Machiko Narita, Umang Rawat, 28 February 2019

There is little evidence on whether deteriorating household balance sheets in advanced economies have made monetary policy less effective since the Global Crisis. Using US household-level data, this column shows that the responsiveness of household consumption to monetary policy has in fact diminished since the crisis, and that households with the highest indebtedness responded the most to monetary policy shocks. Since the distribution of debt did not change after the crisis, this suggests that household debt did not contribute to lessening the effects of monetary policy over time. 

Paolo Angelini, 12 April 2018

It has recently been argued that high non-performing loan stocks can limit banks’ lending ability, and thus impair the effectiveness of monetary policy. This column questions this claim and argues for a more nuanced view. It points to the lack of a serious theoretical analysis of the relationship between non-performing loan stocks and credit dynamics. Policy should focus on maximising the ‘cure rate’ rather than eliminating non-performing loans entirely.

Carlos Garriga, Finn Kydland, Roman Šustek, 16 October 2016

Central banks responded to the financial crisis by cutting policy rates to prevent deflation and curb the decline in economic activity, but these responses have been anything but temporary. This column explores whether the sticky price channel is still relevant in an environment of persistently low rates. Although the effectiveness of the sticky price channel is limited, monetary policy instead transmits through mortgage debt. The recent period of low rates and low inflation has redistributed income and consumption from savers to mortgage borrowers.

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