Monetary policy when households have debt : new evidence on the transmission mechanism James Cloyne, Clodomiro Ferreira, Paolo Surico
By: Cloyne, James S
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Contributor(s): Ferreira, Clodomiro | Surico, Paolo.
Material type: 
TextSeries: Banco de España. Documentos de trabajo ; 1813.Publisher: Madrid Banco de España 2018Description: 79 p. : gráf. ; 30 cm.Subject(s): POLITICA MONETARIA | SOBREENDEUDAMIENTO DE PARTICULARES | CONSUMO | PRESTAMOS HIPOTECARIOSOnline resources: Click here to access online Summary: How do changes in monetary policy affect consumption? Using household data for the US and the UK, we show that most of the aggregate response of consumption to interest rates is driven by households with a mortgage. Outright home owners do not adjust expenditure at all and renters change their spending but by less than mortgagors. Income rises for all households as interest rate cuts directly affect fi rm investment and household consumption, boosting aggregate demand. A key difference between these housing tenure groups is the composition of their balance sheets: mortgagors hold sizable illiquid assets but little liquid wealth, consistent with a higher marginal propensity to consume.
| Item type | Current location | Home library | Call number | URL | Status | Date due | Barcode |
|---|---|---|---|---|---|---|---|
| Recursos electrónicos | IEF | IEF | OL 179 (Browse shelf) | https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/18/Fich/dt1813e.pdf | Available | OL 179 |
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How do changes in monetary policy affect consumption? Using household data for the US and the UK, we show that most of the aggregate response of consumption to interest rates is driven by households with a mortgage. Outright home owners do not adjust expenditure at all and renters change their spending but by less than mortgagors. Income rises for all households as interest rate cuts directly affect fi rm investment and household consumption, boosting aggregate demand. A key difference between these housing tenure groups is the composition of their balance sheets: mortgagors hold sizable illiquid assets but little liquid wealth, consistent with a higher marginal propensity to consume.
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