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Preprints, Working Papers, ... Year : 2019

The role of households' borrowing constraints in the transmission of monetary policy

Fergus Cumming
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Abstract

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 noevidence that the average level of borrowing relative-to-income of the household sector affects the transmission of monetary policy.
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hal-03403257 , version 1 (26-10-2021)

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Fergus Cumming, Paul Hubert. The role of households' borrowing constraints in the transmission of monetary policy. 2019. ⟨hal-03403257⟩
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