Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246102 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 21/2019
Publisher: 
Norges Bank, Oslo
Abstract: 
We investigate how the business, credit and interest rate cycles affect the monetary transmission mechanism, using state-dependent local projection methods and data from 18 advanced economies. We exploit the time-series variation within countries, as well as cross-sectional variation across countries, to investigate this issue. We find that the impact of monetary policy shocks on output and most other macroeconomic and financial variables is smaller during periods of economic downturns, high household debt, and high interest rates. We then build a small-scale theoretical model to rationalize these facts. The model highlights the presence of collateral and debt-service constraints on household borrowing and refinancing as a potential cause for state dependence in monetary policy with respect to the business, credit, and interest rate cycles.
Subjects: 
Monetary Policy
Household Debt
Local Projections
JEL: 
E21
E32
E52
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-121-1
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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