Policy & institutional research
Policy transmission through heterogeneous balance sheets
The aggregate effect of a rate change is an average of very different responses. The distribution of those responses is usually the actual policy question.
Illustrative example
The question
A rate or policy change produces a known aggregate effect. Which parts of the population absorb it, which change behaviour, and how long does the adjustment take?
Approach
01 · Specify
Household and firm agents with heterogeneous debt structure, interest coverage and liquidity buffers, and adaptation rules describing how each responds to a change in financing cost.
02 · Calibrate
Population distributions fitted to published survey and national accounts data by history matching, preserving the tails rather than the mean.
03 · Validate
Residual analysis against observed adjustment paths from prior cycles, and a sensitivity sweep over the adaptation-speed parameter, which typically dominates the result.
Output
- A distributional view of who absorbs the change and who adapts
- Adjustment timing rather than a single-period elasticity
- The convexity point: where interest coverage stops degrading gradually
Illustrative application. No client engagement, institution or published finding is attributed.