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Monetary Policy and Birth Rates: The Effect of Mortgage Rate Pass-Through on Fertility

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  • Fergus Cumming
  • Lisa Dettling

Abstract

This paper examines whether monetary policy pass-through to mortgage interest rates affects household fertility decisions. Our empirical strategy exploits variation in households’ eligibility for a rate adjustment, coupled with the large reductions in the monetary policy rate that occurred during the Great Recession in the U.K. and U.S. We estimate that each one percentage point drop in the policy rate increased birth rates amongst households eligible for a rate adjustment by 3%. Our results provide new evidence on the nature of monetary policy transmission to households and suggest a new mechanism via which mortgage contract structures can affect both aggregate demand and supply.

Suggested Citation

  • Fergus Cumming & Lisa Dettling, 2024. "Monetary Policy and Birth Rates: The Effect of Mortgage Rate Pass-Through on Fertility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(1), pages 229-258.
    • Handle: RePEc:oup:restud:v:91:y:2024:i:1:p:229-258.
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    File URL: http://hdl.handle.net/10.1093/restud/rdad034
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    Cited by:

    1. De Cao, Elisabetta & McCormick, Barry & Nicodemo, Catia, 2022. "Does unemployment worsen babies’ health? A tale of siblings, maternal behaviour, and selection," Journal of Health Economics, Elsevier, vol. 83(C).
    2. Cumming, Fergus, 2022. "Mortgage cash-flows and employment," European Economic Review, Elsevier, vol. 144(C).
    3. Cumming, Fergus & Hubert, Paul, 2022. "House prices, the distribution of household debt and the refinancing channel of monetary policy," Economics Letters, Elsevier, vol. 212(C).
    4. Kim, Jeong Ho (John) & Lee, Heebum & Lee, Sung Kwan, 2022. "Do credit supply shocks affect fertility choices?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).

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    More about this item

    Keywords

    Mortgages; Monetary policy; Birth rates; Fertility; Natality; Interest rates;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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