Heterogeneity and Monetary Policy: A Thematic Review

The rich economic diversity of businesses and households has an impact on economy-wide fluctuations and, in turn, is shaped by these fluctuations. This view, which has emerged over the last decade, has strong implications for both the conduct of monetary policy and its transmission mechanism. Our thematic review focuses on key aspects of this new theory as well as its underlying assumptions. We place these insights in a Canadian context, using relevant micro and macroeconomic data.