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Mortgage cash-flows and employment

Fergus Cumming

European Economic Review, 2022, vol. 144, issue C

Abstract: This paper quantifies the impact of the cash-flow channel of monetary policy on employment by combining novel micro datasets with near-universal coverage. When interest rates fall, mortgaged households spend an important share of the extra cash-flow in their local economy, increasing local labor demand. Overall, a reduction in mortgage payments of £1,000 per household leads to a 0.5 percentage point increase in locally non-tradable employment growth over three years, almost entirely driven by the restaurant sector. Employment-growth effects operate through the intensive margin for small establishments, lower death rates for the mid-sized and higher birth rates for the largest outlets.

Keywords: Employment; Interest rates; Monetary policy; Mortgages (search for similar items in EconPapers)
JEL-codes: E24 E52 G21 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Mortgage Cash-flows and Employment (2019) Downloads
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DOI: 10.1016/j.euroecorev.2021.104019

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European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

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