Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/242553 
Year of Publication: 
2017
Series/Report no.: 
Economics Working Paper Series No. 2017/07
Publisher: 
Auckland University of Technology (AUT), Faculty of Business, Economics and Law, Auckland
Abstract: 
We discover a consumption channel of monetary policy in a model with money and government bonds. When the central bank withdraws government bonds (short-term or long-term) through open market operations, it lowers re- turns on bonds. The lower return has a direct negative impact on consumption by households that hold bonds, and an indirect negative impact on consumption by households that hold money. As a result, fi rms earn less pro fits from production, which leads to higher unemployment. The existence of such a consumption channel can help us understand the e¤ects of unconventional monetary policy.
Subjects: 
interest rate
monetary policy
consumption
unemployment
JEL: 
E24
E40
E50
Document Type: 
Working Paper

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