The consumption-wealth channel: Monetary policy transmission in the case of Sweden

Sammanfattning: This paper examines to what extent the consumption-wealth channel has had an impact on household consumption as a response of monetary policy in the Swedish economy since 1994 when the repo rate was first introduced. Using a structural vector autoregressive model and Swedish data between 1994 Q2 and 2011 Q4, impulse response functions are used in order to trace out the effects of interest rate changes on consumption via its impact on household wealth. The resulting impulse response functions does however not show any indications of a presence of a consumption-wealth channel in the Swedish economy during the period examined. Indicating that the effect of monetary policy on consumption is transmitted mainly via the other channels of the transmission mechanism.