Consumer Durables and Monetary Policy According to HANK

Durables’ interest-rate sensitivity and their persistent comovement with nondurable\r\nspending are hallmarks of monetary policy transmission. We develop a two-sector HANK\r\nmodel that replicates this pattern—both across spending categories and among households\r\nsorted by liquid asset holdings, consistent with empirical evidence. Direct effects of real\r\ninterest rate changes are quantitatively important in reproducing sectoral expenditure comovement, while infrequent information updating is crucial to match the hump-shaped\r\ndynamics of sectoral and aggregate expenditures. Income effects are essential to preventing\r\ncounterfactual declines in nondurable spending resulting from fiscal interventions specifically aimed at stimulating durable purchases.