Consumer Durables and Monetary Transmission in a Two-sector HANK Economy

We devise a two-sector Heterogeneous Agent New Keynesian framework to examine the role of durable goods in the transmission of monetary policy on consumer spending. While durables display much stronger interest-rate sensitivity than nondurables, the indirect (general-equilibrium) effects induced by a monetary shock are the primary drivers of both sectoral expenditures’ responses. In fact, pure income effects prove key in overcoming the negative-comovement force stemming from asymmetric sectoral price stickiness. When accounting for wage stickiness, the responsiveness of liquidity-constrained households and savers tends to be similar not only with respect to nondurables, but also in durable spending.