Monetary policy and birth rates: the effect of mortgage rate pass-through on fertility

Fergus Cumming and Lisa Dettling ()
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Lisa Dettling: Federal Reserve Board of Governors

No 835, Bank of England working papers from Bank of England

Abstract: This paper examines whether monetary policy pass-through to mortgage rates affects household fertility decisions. Using administrative data on UK mortgages and births, our empirical strategy exploits variation in the timing of when families were eligible for a rate adjustment, coupled with the large reductions in interest rates that occurred during the Great Recession. We estimate that each 1 percentage point drop in the policy rate increased birth rates by 2%. In aggregate, this pass-through of accommodative monetary policy to mortgage rates was sufficiently large to outweigh the headwinds of the Great Recession and prevent a ‘baby bust’ in the UK, in contrast to the US. Our results provide new evidence on the nature of monetary policy transmission and suggest a new mechanism via which mortgage contract structures can affect aggregate demand and supply.

Keywords: Mortgages; monetary policy; birth rates; fertility; natality; interest rates (search for similar items in EconPapers)
JEL-codes: E43 E52 J13 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2019-12-20
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Monetary Policy and Birth Rates: The Effect of Mortgage Rate Pass-Through on Fertility (2024)
Working Paper: Monetary Policy and Birth Rates: The Effect of Mortgage Rate Pass-Through on Fertility (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0835

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