Discussion paper
DP20083 Consumer Durables and Monetary Policy According to HANK
Durable and nondurable consumption comovement is central to monetary policy transmission. Using a two-sector Heterogeneous Agent New Keynesian model, we generate realistic sectoral comovement while capturing key household spending patterns. Both direct and indirect effects matter: intertemporal substitution strongly influences durable spending, while income effects drive persistence in nondurable responses. Comovement also extends to households sorted by liquid asset holdings. Distinguishing transmission channels is crucial for understanding the macroeconomic impact of targeted fiscal policies, as subsidies for durable goods purchases.
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