We employ local projections to examine how the degree of financial integration shapes the transmission of monetary policy to consumer prices and output in the euro area. Our findings indicate that greater financial integration significantly amplifies the effects of monetary policy on both consumer prices and output. Specifically, we find that under high levels of financial integration, transmission to both prices and output is strong, whereas under low levels, transmission is completely impaired for prices and reduced by more than half for output. The amplification effect from higher financial integration is evident in both core and peripheral member states, but it is more pronounced in the periphery.

How does monetary policy affect household portfolio composition? Resorting to highly granular data on the balance sheets of Norwegian households from 1993 to 2016, we analyze how their wealth portfolios change in response to well-defined monetary policy shocks. We document three empirical facts on the aggregate response of households after a 1 percentage point increase in the policy rate. i) The total value of households' portfolios decreases by 4.1% two years after the shock; ii) monetary policy tightening decreases the risk exposure of portfolios, in particular the value of stocks, bonds, and mutual funds; iii) stock market participation is unaffected by monetary policy but those who already own stocks increase their holdings. We find pronounced heterogeneity in the responses, noting these additional facts: iv) the drop in risky asset values is mostly driven by the wealthiest 10 percent, while a short-term positive response of safe assets comes from middle-class households' portfolios; v) middle‑aged homeowners benefit from a short-term house price appreciation, but for younger households, the effect becomes negative over time, indicating that tighter policy delays entry into home ownership.