Household Heterogeneity and Monetary Policy Amplification in Austria

We extend Auclert's (2019) sufficient-statistics decomposition of the consumption response to monetary policy to an open economy in which households hold foreign assets and liabilities. Each foreign channel then splits into a level component, driven by the aggregate foreign position, and a redistribution component, driven by how foreign exposures are distributed across households. Using Austrian household survey data, we find that redistribution raises the consumption response to a rate cut by 18 percent relative to a redistribution-free benchmark, mostly through households with variable rate mortgages. Income-GDP elasticities from quantile regressions decline steeply with income, but because marginal propensities to consume (MPC) are only weakly related to income, the earnings-heterogeneity channel adds about 3 percent with a profile based on personal gross earnings and 0.4 and 0.5 percent with household-income profiles. In an illustrative calibration, the foreign channels add about 13 percent, mostly as a level effect from the revaluation of net foreign assets that a representative household would also experience. Relative to an open-economy redistribution-free benchmark, heterogeneity amplifies the response by 17.5 percent.