Regional Heterogeneity and Monetary Policy
Andreas Fuster (),
Erik Hurst () and
Joseph Vavra ()
No 23270, NBER Working Papers from National Bureau of Economic Research, Inc
We argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending responses to interest rate cuts but that these effects vary over time with changes in the regional distribution of house price growth and unemployment. We then build a heterogeneous household model of refinancing and use it to explore the aggregate implications for monetary policy arising from our regional evidence. We find that the 2008 equity distribution made spending in depressed regions less responsive to interest rate cuts, thus dampening aggregate stimulus and increasing regional consumption inequality, whereas the opposite occurred in some earlier recessions. Taken together, our results strongly suggest that monetary policy makers should track the regional distribution of equity over time.
JEL-codes: E21 E32 E5 R1 R2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-mac, nep-mon and nep-ure
Note: EFG ME PE
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)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
Working Paper: Regional heterogeneity and monetary policy (2017)
Working Paper: Regional Heterogeneity and Monetary Policy (2017)
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:nbr:nberwo:23270
Ordering information: This working paper can be ordered from
The price is Paper copy available by mail.
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Series data maintained by ().