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Article: Mortgage Debt, Hand-to-Mouth Households, and Monetary Policy Transmission
Title | Mortgage Debt, Hand-to-Mouth Households, and Monetary Policy Transmission |
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Authors | |
Keywords | Consumption Monetary policy Disposable income shocks MPC Mortgage |
Issue Date | 2022 |
Publisher | Oxford University Press. The Journal's web site is located at http://rof.oxfordjournals.org/ |
Citation | Review of Finance, 2022, v. 26 n. 3, p. 487-520 How to Cite? |
Abstract | Using a representative sample of credit card holders from a leading Chinese commercial bank, we investigate how consumers respond to an unexpected interest rate decrease that automatically reduces interest expenses for all mortgage borrowers in the country and thereby generates significant positive disposable-income shocks. Our difference-in-differences analysis shows that compared with homeowners without mortgage obligations, mortgage borrowers increased their monthly credit card spending by 8.7% after the 230-bps mortgage rate reduction announced in September 2008. We find a significant spending response both immediately after the announcement and during the post-reset period. The credit card delinquency rate also decreased after the mortgage rate reset. Subsequent to an interest-rate increase episode, mortgage borrowers symmetrically reduced their credit card spending. Hand-to-mouth mortgage borrowers experienced a more pronounced spending increase. The debt-service channel plays an important role in transmitting monetary policy—our estimate implies a marginal propensity to consume 0.40–0.54 through credit card spending. |
Persistent Identifier | http://hdl.handle.net/10722/311720 |
ISSN | 2023 Impact Factor: 5.6 2023 SCImago Journal Rankings: 7.769 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Agarwal, S | - |
dc.contributor.author | Deng, Y | - |
dc.contributor.author | Gu, Q | - |
dc.contributor.author | He, J | - |
dc.contributor.author | Qian, W | - |
dc.contributor.author | Ren, Y | - |
dc.date.accessioned | 2022-04-01T09:12:19Z | - |
dc.date.available | 2022-04-01T09:12:19Z | - |
dc.date.issued | 2022 | - |
dc.identifier.citation | Review of Finance, 2022, v. 26 n. 3, p. 487-520 | - |
dc.identifier.issn | 1572-3097 | - |
dc.identifier.uri | http://hdl.handle.net/10722/311720 | - |
dc.description.abstract | Using a representative sample of credit card holders from a leading Chinese commercial bank, we investigate how consumers respond to an unexpected interest rate decrease that automatically reduces interest expenses for all mortgage borrowers in the country and thereby generates significant positive disposable-income shocks. Our difference-in-differences analysis shows that compared with homeowners without mortgage obligations, mortgage borrowers increased their monthly credit card spending by 8.7% after the 230-bps mortgage rate reduction announced in September 2008. We find a significant spending response both immediately after the announcement and during the post-reset period. The credit card delinquency rate also decreased after the mortgage rate reset. Subsequent to an interest-rate increase episode, mortgage borrowers symmetrically reduced their credit card spending. Hand-to-mouth mortgage borrowers experienced a more pronounced spending increase. The debt-service channel plays an important role in transmitting monetary policy—our estimate implies a marginal propensity to consume 0.40–0.54 through credit card spending. | - |
dc.language | eng | - |
dc.publisher | Oxford University Press. The Journal's web site is located at http://rof.oxfordjournals.org/ | - |
dc.relation.ispartof | Review of Finance | - |
dc.subject | Consumption | - |
dc.subject | Monetary policy | - |
dc.subject | Disposable income shocks | - |
dc.subject | MPC | - |
dc.subject | Mortgage | - |
dc.title | Mortgage Debt, Hand-to-Mouth Households, and Monetary Policy Transmission | - |
dc.type | Article | - |
dc.identifier.email | Qian, W: wqian@hku.hk | - |
dc.identifier.authority | Qian, W=rp02908 | - |
dc.description.nature | link_to_OA_fulltext | - |
dc.identifier.doi | 10.1093/rof/rfac011 | - |
dc.identifier.hkuros | 332490 | - |
dc.identifier.volume | 26 | - |
dc.identifier.issue | 3 | - |
dc.identifier.spage | 487 | - |
dc.identifier.epage | 520 | - |
dc.identifier.isi | WOS:000769577200001 | - |
dc.publisher.place | United Kingdom | - |