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UID:7e619fbebe8f014d36f1ae1e5180533e
CATEGORIES:Seminars
CREATED:20150210T193649
SUMMARY:Marco Di Maggio - Columbia University
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Monetary Policy Pass-Through: Household Consumption and Voluntary Deleverag
 ing\nAbstract:\nDo households benefit from expansionary monetary policy? We
  investigate how indebted households’ consumption and saving decisions are 
 affected by anticipated changes in monthly interest payments. We focus on b
 orrowers with adjustable rate mortgages originated between 2005 and 2007 fe
 aturing an automatic reset of the interest rate after five years. The month
 ly payment due from the average borrower falls by 52 percent ($900) upon re
 set, resulting in an increase in disposable income totaling tens of thousan
 ds of dollars over the remaining life of the mortgage. We uncover three pat
 terns. First, the average household increases monthly car purchases by 40 p
 ercent ($150) upon reset. Second, this expansionary effect is attenuated by
  the borrowers’ voluntary deleveraging, as a significant fraction of the in
 creased income is deployed to accelerate debt repayment. Third, the margina
 l propensity to consume is significantly higher for low income borrowers an
 d for those that had experienced a larger decline in housing wealth. To com
 plement these household-level findings, we employ county-level data to prov
 ide evidence that consumption responded more to a reduction in short-term i
 nterest rates in counties with a larger fraction of adjustable rate mortgag
 e debt. Our results shed light on the income channel of monetary policy as 
 well as the role of debt rigidity in reducing the effectiveness of monetary
  policy.\n
DTSTAMP:20260408T062312Z
DTSTART:20140929T173000Z
DTEND:20140929T190000Z
SEQUENCE:0
TRANSP:OPAQUE
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