There has been an explosion of research on this issue in recent years.10 Much of it focuses on the how monetary policy changes – for example, increasing or decreasing interest rates, or purchasing assets – affects different types of households according to income, job-type or wealth.
When I talk about ‘conventional’ monetary policy, if there are more households in society whose consumption is very sensitive to income changes – typically those with limited access to credit, or fewer savings – then the transmission of monetary policy to the real economy tends to be stronger.