Interest Rate Pass-Through: Mortgage Rates, Household Consumption, and Voluntary Deleveraging

Exploiting variation in the timing of resets of adjustable-rate mortgages (ARMs), we find that a sizable decline in mortgage payments (up to 50 percent) induces a significant increase in car purchases (up to 35 percent). This effect is attenuated by voluntary deleveraging. Borrowers with lower incom...

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Vydáno v:The American economic review Ročník 107; číslo 11; s. 3550 - 3588
Hlavní autoři: Di Maggio, Marco, Kermani, Amir, Keys, Benjamin J., Piskorski, Tomasz, Ramcharan, Rodney, Seru, Amit, Yao, Vincent
Médium: Journal Article
Jazyk:angličtina
Vydáno: Nashville American Economic Association 01.11.2017
American Economic Assoc
Témata:
Adjustable rate mortgages
ARM
Automobile sales
Conforming loans
Consumer behavior
Consumption
Debt repayment
Economic models
Employment
Household consumption
Households
Housing
Housing prices
Interest rates
Loan payments
Monetary policy
Mortgage backed securities
Mortgage loans
Mortgage rates
Mortgages
Payments
Prices
Propensity to consume
Wealth
ZIP codes
ISSN:0002-8282, 1944-7981
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Shrnutí:Exploiting variation in the timing of resets of adjustable-rate mortgages (ARMs), we find that a sizable decline in mortgage payments (up to 50 percent) induces a significant increase in car purchases (up to 35 percent). This effect is attenuated by voluntary deleveraging. Borrowers with lower incomes and housing wealth have significantly higher marginal propensity to consume. Areas with a larger share of ARMs were more responsive to lower interest rates and saw a relative decline in defaults and an increase in house prices, car purchases, and employment. Household balance sheets and mortgage contract rigidity are important for monetary policy pass-through.
Bibliografie:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 14
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.20141313