The Household Cash Flow Channel of Monetary Policy

Helen Hughson, Gianni La Cava (), Paul Ryan and Penelope Smith
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Paul Ryan: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2016, 21-30

Abstract: Changes in interest rates can affect household spending by directly affecting households� interest income and payments and, in turn, the amount of cash that households have available to spend. This is typically referred to as the �household cash flow channel of monetary policy�. Household-level data provide evidence that the cash flow channel operates both for households that are net borrowers and for those that are net lenders, though the effect on borrowers is estimated to be much stronger than the effect on lenders. Overall, changes in household cash flow appear to be an important channel through which lower interest rates can stimulate greater household spending.

Keywords: household cash flow; household consumption; monetary policy; liquidity constraints; mortgage debt; bank deposits; interest payments; interest receipts (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (38)

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Related works:
Working Paper: The Household Cash Flow Channel of Monetary Policy (2016)
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