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Title: Monetary policy transmission under changing heterogeneous population Authors:  Ken Bastiaensen - UGent (Belgium) [presenting]
Abstract: Secular stagnation currently constitutes one of the main debates in economics: Low economic growth, low inflation and low interest rates have become commonplace in many developed economies. One potential driving factor of secular stagnation is that monetary policy is, in the presence of ageing, no longer an effective tool to counter a deficient demand for investment goods in the economy. The focus is on saving and investment (S\&I) decisions given the heterogeneity of individuals with regard to age, expected life expectancy, civil state, income level, income stability, wealth, indebtedness, spending patterns, etcetera. We use several tools from Statistical Learning and more traditional econometrics models such as local projection modelling.With this approach we are able to gain insight into past behaviour, uncovering patterns in groups of individuals that are not obvious from aggregate observables. More importantly, we are able to predict future S\&I decisions for each individual, under given future scenarios of macroeconomic conditions such as interest rate. Special care has been given to avoid overfitting. The behaviour arises solely from the experience of other agents without solving any structural economic model as assumed in traditional economics. Our approach has been employed with remarkable out-of-sample success (1 year ex post) on millions of real-world agents. Preliminary results show changing (non-linear) behaviour with regard to changing characteristics.