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Household debt and the transmission of monetary policy: New evidence

Cloyne, James, Ferreira, Clodomiro F.,Surico, Paolo, (2016),  “Household debt and the transmission of monetary policy: New evidence”, Voxeu, 21 Απριλίου

Monetary policy has significantly heterogeneous effects on private consumption, which depend on the household’s debt and balance sheet position. This column suggests that households with mortgage debt behave in a liquidity-constrained manner, while those without are far less sensitive to movements in interest rates. Though the direct channel of monetary transmission – i.e. the movement in interest cash flows – also affects the expenditure of mortgagors, most of the aggregate effect comes via the stimulus to the income of all housing tenure groups.

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