How large are the distributional effects of monetary policy in the euro area? Does heterogeneity matter for monetary policy? We answer these questions based on the results of research projects conducted at the ECB under the aegis of a dedicated research task force. A monetary policy easing causes a temporary reduction in consumption inequality; this is the case for both conventional and unconventional monetary policy. Accounting for heterogeneity at the household level provides a new perspective on the policy transmission mechanism, but it doesnot fundamentally alter our views of aggregate dynamics. Heterogeneity across firms appearsto provide useful information to explain and forecast aggregate variables.
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