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α: calibrated so average coauthorship-adjusted count equals average raw count
Has monetary policy been less effective since the global financial crisis because of deteriorating household balance sheets? This paper examines the question using household data from the United States. It compares the responsiveness of household consumption to monetary policy shocks in the preand post-crisis periods, relating changes in monetary transmission to changes in household indebtedness and liquidity. The results show that the responsiveness of household consumption has diminished since the crisis. However, household balance sheets are not the culprit. More indebted and less liquid households are the most responsive to monetary policy, and their share in the population grew. The decline in the consumption response does not seem to be attributable to households’ decreasing interest rate exposure, either.