In:
American Economic Review, American Economic Association, Vol. 107, No. 11 ( 2017-11-01), p. 3550-3588
Abstract:
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. (JEL D12, D14, E43, E52, G21, R31)
Type of Medium:
Online Resource
ISSN:
0002-8282
DOI:
10.1257/aer.20141313
Language:
English
Publisher:
American Economic Association
Publication Date:
2017
detail.hit.zdb_id:
203590-X
detail.hit.zdb_id:
2009979-4
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