speech households and the transmission of monetary policy speech by philip r. lane, member of the executive board of the ecb, at the central bank of ireland / ecb conference on household finance and consumption dublin, 16 december 2019 introduction it is a special pleasure to speak at the sixth conference on household finance and consumption, which is jointly organised this year by the central bank of ireland and the european central bank. the engine behind this conference series is the eurosystem ’ s household finance and consumption network, which coordinates the household finance and consumption survey ( hfcs ). the hfcs gives us an insight into the distributions of assets, liabilities and incomes across euro area households. it is very promising that many of you, together with other researchers, are using this dataset to improve our understanding of key features of economic behaviour in europe. in my remarks today, i wish to discuss the relevance of differences across households for macroeconomic outcomes and the transmission of monetary policy. households differ across many dimensions : age, geography, employment, income, wealth, assets, and debt. it follows that the impact of a macroeconomic shock or a shift in monetary policy will naturally vary across households. in turn, understanding how shocks and policies affect different types of households has the potential to improve our modelling of aggregate dynamics compared with the restrictive approach of imposing that aggregate household behaviour can be adequately represented by a single, representative household. moreover, the examination of household - level data is also important in measuring the distributional impact of macroeconomic shocks and macro - financial policy decisions, which can help inform wider policy discussions about income distribution. before turning to the microeconomic evidence, a natural starting point is to review the standard macroeconomic analysis of aggregate consumption dynamics. chart 1 shows that consumption has increased steadily in recent years, which lines up with the substantial increase in household incomes due to rising employment and increasing wages. another important indicator is consumer confidence, which in turn relates to how consumers view their personal financial situation and the wider macroeconomic situation ( chart 2 ). in addition, households do not only consume, but also contribute to investment in the form of residential property – both house purchases and renovations ( chart 3 ). chart 1 households ’ real disposable income and consumption ( year - on - year percentage changes, percentage point contributions ) sources : eurostat and ecb calculations. notes : all income components are deflated with the gdp deflator. the contribution from the terms of trade is proxied by

of the higher equity values resulting from higher equity prices. this raises the question as to whether the federal reserve, the ecb and other central banks in advanced economies are insufficiently sensitive to the impact of their unconventional policies on emerging market economies, or whether the complaints of emerging markets about these spillover effects are unjustified. this topic has been widely discussed ; it was, for example, one of the core themes discussed at the 2013 jackson hole central bank according to ecb staff estimates, developments in energy and food prices and the impact of indirect taxes explain around three - quarters of the overall decline in hicp inflation. some of the global factors that have dampened inflation ( such as lower commodity prices ) contribute to improve real disposable incomes and support spending. see, for example, lo duca, m., g. nicoletti and a. vidal martinez, 2014, “ global corporate bond issuance : what role for us quantitative easing? ”, ecb working paper series, no 1649, march 2014. the authors find evidence that bond issuance in emerging markets since 2009 would have been halved without quantitative easing in the united states. bis central bankers ’ speeches conference. we also recently had a very enriching panel discussion on this at the hutchins center on fiscal and monetary policy at brookings. 11 in this context, i would like to stress three points. first, we should not neglect the positive spillover effects from accommodative conventional and unconventional monetary policies in advanced economies since the start of the global financial crisis. for example, in the us, estimates suggest that the purchases of long - term treasury bonds reduced yields by up to – 120 bp. moreover, umps in the us supported gdp growth, even though there is more uncertainty regarding the magnitude of the effects. 12 these policies have prevented even more pronounced and protracted financial market dysfunctioning that would almost certainly have been transmitted to the rest of the world. in addition, they have supported the recovery in advanced economies, thereby stimulating demand for imports from the rest of the world. this notwithstanding, unconventional monetary policies have also led to instances of higher volatility in other economies. for example, there is evidence that some elements of unconventional monetary policy in advanced economies have accentuated the pro - cyclicality of capital flows, in particular to emerging market economies. the timing of an exit from unconventional monetary policies has been called into question. here it has to be kept in mind that the world –