Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189942 
Year of Publication: 
2017
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 342
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
We examine the cash-flow channel of monetary policy, i.e. the effect of monetary policy on spending when households hold debt linked to short-term rates such as adjustable rate mortgages (ARMs). Using registry-based data on Swedish households, we estimate substantial heterogeneity in consumption responses to a change in monetary policy through the cash-flow channel. Our findings imply that monetary policy has a stronger effect on real economic activity when households are highly indebted and have ARMs. For homeowners with a debt-to-income ratio of around 3 and ARMs, the estimated response is equivalent to a marginal propensity to consume of 0.5.
Subjects: 
Monetary policy
consumption
household debt
variable interest rates
adjustable rate mortgages
JEL: 
D14
E21
E52
G11
Document Type: 
Working Paper

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