Monetary Policy and Household Portfolio Composition
with Tiago Bernardino, Ana Melissa Ferreira, Hans Holter, Mariana Pires and Luís Teles Morais.
Abstract:How does monetary policy affect household portfolio composition? Resorting to highly granular data on the balance sheets of Norwegian households, we analyze how their wealth portfolios change in response to well-identified monetary policy shocks. We document new empirical facts about how household portfolios adjust to monetary tightening: i) total portfolio size rises initially but contracts after two years; ii) risky asset values decline, while housing wealth increases briefly
before falling, with secondary residences showing a pronounced short-run rise; iii) financially active households rebalance by increasing their holdings of stocks and private-equity; iv) decreases in risky asset values are concentrated among the
wealthiest households; v) housing responses are highly heterogeneous, with richer households expanding primary and secondary housing; vi) holding adjustments vary across the wealth distribution: stock holdings increase slightly more at the top,
while private-equity increases are concentrated in the tails.
You can click here to read.