Monetary Policy Transmission to Consumer Financial Stress and Durable Consumption

Dimitris Georgarakos and Konstantinos Tatsiramos

No 12359, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine the effects of monetary policy on household self-assessed financial stress and durable consumption using panel data from eighteen annual waves of the British Household Panel Survey. For identification, we exploit random variation in household exposure to interest rates generated by the random timing of household interview dates with respect to policy rate changes. After accounting for household and month-year-of-interview fixed effects, we uncover significant heterogeneities in the way monetary policy affects household groups that differ in housing and saving status. In particular, an increase in the interest rate induces financial stress among mortgagors and renters, while it lessens financial stress of savers. We find symmetric effects on durable consumption, mainly driven by mortgagors with high debt burden or limited access to liquidity and younger renters who are prospective home buyers.

Keywords: monetary policy; mortgage debt; debt burden; financial stress; consumption (search for similar items in EconPapers)
JEL-codes: E21 G21 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2019-05
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mac
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Citations: View citations in EconPapers (10)

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Working Paper: Monetary policy transmission to consumer financial stress and durable consumption (2019)
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