The role of households’ borrowing constraints in the transmission of monetary policy
Fergus Cumming and
No 836, Bank of England working papers from Bank of England
This paper investigates how the transmission of monetary policy to the real economy depends on the distribution of household debt. Using an original loan‑level dataset covering the universe of UK mortgages, we assess the effect of monetary shocks on aggregate consumption by exploiting time variation in a measure of the proportion of households close to their borrowing constraint. We find that monetary policy is most potent when there is a large share of constrained households. In contrast, we find no evidence that the average level of borrowing relative‑to‑income of the household sector affects the transmission of monetary policy.
Keywords: Heterogeneity; distributions; mortgage debt; state-dependence (search for similar items in EconPapers)
JEL-codes: E21 E52 E58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2019-12-20, Revised 2020-01-06
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... -monetary-policy.pdf Full text (application/pdf)
Working Paper: The role of households' borrowing constraints in the transmission of monetary policy (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0836
Access Statistics for this paper
More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().