The Cash-Flow Channel of Monetary Policy - Evidence from Billions of Transactions, SeHyoun Ahn, Sigurd Mølster Galaasen and Mathis Mæhlum
We present novel findings on the impact of monetary policy on consumer spending behavior using a recently assembled high-frequency household expenditure panel. Leveraging comprehensive weekly electronic transaction-level data for all individuals in Norway in the period 2006-2018, our study sheds light on the high-frequency consumption response to monetary policy through changes in fast moving debt interest expenses. We employ several identification strategies, including household specific interest rate shocks arising from a natural experiment as well as estimated monetary policy shocks. We find that 100 NOK higher interest expenses lead to around 30 NOK lower consumption on average in the first year, and the effect materializes gradually within the first three months. Our results indicate the presence of a substantial and rapid cash-flow channel of monetary policy.