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The Mortgage Debt Channel of Monetary Policy when Mortgages are Liquid / Matthew Elias, Christian Gillitzer, Greg Kaplan, Gianni La Cava, Nalini V. Prasad.
- Format:
- Book
- Author/Creator:
- Elias, Matthew.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w34461.
- NBER working paper series no. w34461
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2025.
- Summary:
- We examine what is widely considered to be one of the strongest channels of monetary policy transmission into household spending - the effect of changes in mortgage payments when mortgage rates are linked to the short-term policy rate. Using bank transactions data from Australia, we analyze a cumulative 425 basis point increase in the central bank policy rate, which caused mortgage repayments for homeowners with adjustable-rate mortgages to increase by $13,800. We find little change in the spending of adjustable-rate mortgagors relative to fixed rate mortgagors. This is because adjustable-rate mortgages come with redraw facilities that make mortgages liquid, and households had large excess buffers due to pandemic-era transfer programs and restrictions on spending. Our findings demonstrate that the direct effects of a monetary policy tightening on household spending need not be large.
- Notes:
- November 2025.
- Print version record
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