Mortgage debt is the largest part of household debt

Mortgage debt and time-varying monetary policy transmission

Macroeconomic Dynamics ◽

10.1017/s136510052100050x ◽

2021 ◽

pp. 1-26

Author(s):

David Finck ◽

Jörg Schmidt ◽

Peter Tillmann

Keyword(s):

Monetary Policy ◽

Dynamic Stochastic General Equilibrium ◽

Household Debt ◽

Time Varying ◽

Mortgage Debt ◽

Vector Autoregressive ◽

Time Varying Parameter ◽

Policy Transmission ◽

Dynamic Stochastic ◽

Adjustable Rate

Abstract This paper studies the role of monetary policy for the dynamics of US mortgage debt, which accounts for the largest part of household debt. A time-varying parameter vector autoregressive (VAR) model allows us to study the variation in the sensitivity of mortgage debt to monetary policy. We find that an identically sized policy shock became less effective over time. We use a dynamic stochastic general equilibrium model to show that a fall in the share of adjustable rate mortgages (ARMs) can replicate this finding. Calibrating the model to the drop in the ARM share since the 1980s yields a decline in the sensitivity of housing debt to monetary policy which is quantitatively similar to the VAR results. A sacrifice ratio for mortgage debt reveals that a policy tightening directed toward reducing household debt became more expensive in terms of a loss in employment. Counterfactuals show that this result cannot be attributed to changes in monetary policy itself.

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The Role of Television in Household Debt: Evidence from the 1950's

The B E Journal of Economic Analysis & Policy ◽

10.2202/1935-1682.2393 ◽

2010 ◽

Vol 10 (1) ◽

Cited By ~ 4

Author(s):

Matthew J. Baker ◽

Lisa M George

Keyword(s):

Labor Supply ◽

Durable Goods ◽

Television Advertising ◽

Household Debt ◽

Micro Data ◽

Survey Of Consumer Finances ◽

Mortgage Debt ◽

Consumer Finances ◽

Early Access

Abstract We examine whether advertising increases household debt by studying the initial expansion of television in the 1950's. Exploiting the idiosyncratic spread of television across markets, we use micro data from the Survey of Consumer Finances to test whether households with early access to television saw steeper debt increases than households with delayed access. Results indicate that exposure to television advertising increases the tendency to borrow for household goods and the tendency to carry debt. Television access is associated with higher debt levels for durable goods, but not with the total amount of non-mortgage debt. We provide suggestive evidence that increased labor supply may drive our results. The role of media in household debt may be greater than suggested by existing research.

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