The Distribution of Households' Indebtedness and the Transmission of Monetary Policy

Fergus Cumming and Paul Hubert

The Review of Economics and Statistics, 2023, vol. 105, issue 5, 1304-1313

Abstract: We investigate whether the dynamic response of aggregate consumption to monetary policy depends on the distribution of household debt relative to income. Using U.K. loan-level microdata, we propose a novel approach to isolate the fraction of households with a limited ability to smooth consumption. By exploiting time and cross-sectional variation, we show that consumption responds more to monetary policy when the share of highly indebted households is large, but find no state contingency with respect to the overall level of debt-to-income. Our results highlight the role of household heterogeneity for understanding monetary transmission to aggregate consumption.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1162/rest_a_01094
Access to PDF is restricted to subscribers.

Related works:
Working Paper: The Distribution of Households' Indebtedness and the Transmission of Monetary Policy (2023)
Working Paper: The Distribution of Households' Indebtedness and the Transmission of Monetary Policy (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:105:y:2023:i:5:p:1304-1313

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().