The Credit Supply Channel of Monetary Policy Tightening and its Distributional Impacts

Joshua Bosshardt, Marco Di Maggio, Ali Kakhbod and Amir Kermani

No 31464, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies how tightening monetary policy transmits to the economy through the mortgage market and sheds new light on the distributional consequences at both individual and regional levels. We find that credit supply factors, specifically restrictions on the debt-to-income (DTI) ratio, account for most of the decline in mortgages. These effects are even more pronounced for minority and middle-income borrowers, who find themselves excluded from the credit market. Additionally, regions with historically high DTI ratios exhibit greater reductions in mortgage originations, house prices, and consumption.

JEL-codes: E20 E5 E52 G5 G51 (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-ban and nep-mon
Note: CF ME
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Citations: View citations in EconPapers (2)

Published as Joshua Bosshardt & Marco Di Maggio & Ali Kakhbod & Amir Kermani, 2024. "The credit supply channel of monetary policy tightening and its distributional impacts," Journal of Financial Economics, vol 160.

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Journal Article: The credit supply channel of monetary policy tightening and its distributional impacts (2024)
Working Paper: The Credit Supply Channel of Monetary Policy Tightening and its Distributional Impacts (2023)
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