Household Data Key to Effective Monetary Policy in Europe

The latest Household Finance and Consumption Network (HFCN) meeting in Athens spotlighted the critical role of household data in shaping monetary policy across Europe.

Governor Yannis Stournaras welcomed delegates by acknowledging the evolution and significance of the Household Finance and Consumption Survey (HFCS), which now sets the standard for pan-European data collection on household finances. Before the HFCS, fragmented and unharmonized data limited policymakers' ability to understand the diverse economic realities facing European households—often forcing reliance on US-based data and models unsuited to the euro area’s unique context.

Stournaras emphasized that the Global Financial Crisis exposed the weaknesses of relying on representative agent models, which ignore variations in household behavior. The HFCS has been key in revealing how the impact of monetary policy can differ dramatically among households. For example, monetary easing can stimulate consumption more effectively when benefiting liquidity-constrained families, and asset purchase programs' effects on inequality are more nuanced than previously assumed, with recent studies suggesting that while such policies may boost asset values, they can also decrease income inequality through higher earnings for lower-income groups.

The survey's latest findings have also helped analyze who bears the brunt of inflation, showing that the impact varies by age and financial profile, with younger households often gaining from reduced real debt burdens while retirees face more significant losses. Policymakers are now encouraged to complement HFCS data with administrative records and expectation surveys to deepen their understanding and to shift research towards uncovering the roots of household heterogeneity—not just documenting it.

The renewed focus on obtaining and interpreting granular, harmonized data ensures policy responses can be more effectively tailored to the realities faced by European citizens, making this work an essential pillar for future economic stability and inclusivity.