Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202705 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12359
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
monetary policy
mortgage debt
debt burden
financial stress
consumption
JEL: 
G21
E21
Document Type: 
Working Paper

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