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The effect of monetary policy on household consumption expenditures in Portugal: A decomposition of the transmission channel


We follow Slacalek et al. (2020) monetary transmission decomposition approach to investigate the effects of monetary policy shocks on household consumption expenditures in Portugal since joining the euro area. Extending their analysis to Portugal, we quantify the monetary policy transmission channels using a combination of micro-level household data from the 3rd wave of the Household Finance and Consumption Survey and structural vector autoregressions estimated using aggregate-level data and identified using high-frequency data around monetary policy meetings. We find that the wealthy hand-to-mouth households’ consumption has the most significant reaction to monetary shocks because of extensive housing wealth and net interest rate exposure channels. In addition, due to its large size as a group in the Portuguese economy, we find that the wealthy hand-to-mouth households’ consumption response explains why the aggregate consumption reacts more to monetary shocks in Portugal than in other European countries.

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Data availability

The data from HFCS data is not publicly available. Joao Duarte was granted access to the data for research purposes following the ECB microdata request procedure.

Code availability

All code was written in R, Stata and Matlab and can be made available.


  1. We thank an anonymous referee for suggesting the usage of HFCS 3rd wave data to calibrate the marginal propensity to consume for each household in Portugal.


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We thank the Fundação Francisco Manuel dos Santos financial support. Joao Duarte work was funded by Fundação para a Ciência e a Tecnologia (UIDB/00124/2020, UIDP/00124/2020 and Social Sciences DataLab - PINFRA/22209/2016), POR Lisboa and POR Norte (Social Sciences DataLab, PINFRA/22209/2016), PTDC/EGE- ECO/7620/2020 and CEECIND/03227/2018.

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Correspondence to João B. Duarte.

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HFCS 3rd wave variables

  • Consumption

  • hi0220 - monthly expenses on consumer goods and services

  • Income

  • di1300 - rental income from real estate property

  • di1400 - income from financial assets

  • di1412 - interest payments

  • di1500 - income from pensions

  • di1420 - income from private business other than self-employment

  • di1600 - Regular social transfers (except pensions)

  • di1700 - income from regular private transfers

  • di1800 - income from other sources

  • di2000 - total household gross income

  • Liquid assets

  • da2101 - deposits

  • da2102 - mutual funds

  • da2103 - bonds

  • da2105 - shares, publicly traded

  • Liquid liabilities

  • dl1210 - outstanding balance of credit line/overdraft

  • dl1220 - outstanding balance of credit card debt

  • dl1230 - outstanding balance of other non-mortgage loans

  • Illiquid assets

  • da1110 - value of household’s main residence

  • da1120 - value of other real estate property

  • da1140 - value of self-employment businesses

  • da2109 - voluntary pension/whole life insurance

  • pf0710 - current value of all occupational pension plans that have an account

  • Illiquid liabilities

  • hb170$ - household main residence mortgage $x: amount still owed

  • hb180$ - household main residence mortgage $x: adjustable interest rate

  • hb370$ - other property mortgage $x: amount still owed

  • Stocks

  • hd1510 - value of publicly traded shares

  • hd1520 - any shares issued by foreign companies? (1 - Yes, 2 - No)

Marginal tax rates

Table 5 Tax rates for Portugal, 2014

Sources for macroeconomic variables

Interest rate

Euro area (changing composition) - Money Market - Eonia rate - Historical close, average of observations through period. End of March, June, September and December are used as quarterly values. Source: European Central Bank

Non-durable consumption

Private consumption of resident households by durability - chain linked volume data. Sum of consumption of non-durable goods and services Source: Statistics Portugal, National Accounts

House prices

The nominal house price index covers the sales of newly-built and existing dwellings. Source: OECD

Stock prices

A share price index measures how the value of the stocks on the national stock exchange in the index is changing. Source: OECD


Portugal - HICP - Overall index, Monthly Index, seasonally adjusted by the authors. Quarterly values are obtained by averaging monthly values. Source: European Central Bank


Gross domestic product at market prices - Portugal - Total economy, Euro, Current prices. Seasonally adjusted by the authors. Source: European Central Bank

Portuguese stock market wealth

Fig. 8
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Percentiles 95, 96, 97, 98 and 99 of Portuguese stock market wealth, EUR Source: Household Finance and Consumption Survey 3rd wave

Table 6 Decomposition means and confidence intervals

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Duarte, J.B., Pereira, N. The effect of monetary policy on household consumption expenditures in Portugal: A decomposition of the transmission channel. Port Econ J (2022).

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  • Consumption
  • High-frequency identification
  • Monetary transmission
  • Dynamic factor models
  • VAR
  • Heterogeneous agents


  • D31
  • E21
  • E52
  • E58