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Mortgages, cash-flow shocks and local employment

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  • Cumming, Fergus

    (Bank of England)

Abstract

This paper quantifies the local impact of monetary policy through the cash-flow channel during the Crisis by combining novel micro datasets with near-universal coverage of UK mortgages and employment. I estimate that a reduction in mortgage payments equivalent to 1% of household income led to around a 5 percentage point increase in employment growth in non-tradable businesses the following year. But the spatial distribution of mortgage and labour market structures resulted in significant heterogeneity of this effect across the country. Taken at face value, the estimates suggest that the overall effect of accommodative monetary policy on total employment growth in 2010 varied by around 1.5 percentage points across regions.

Suggested Citation

  • Cumming, Fergus, 2018. "Mortgages, cash-flow shocks and local employment," Bank of England working papers 773, Bank of England.
    • Handle: RePEc:boe:boeewp:0773
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    Cited by:

    1. repec:spo:wpmain:info:hdl:2441/5buvtkmlk091prrdje4a0tbkla is not listed on IDEAS
    2. Fergus Cumming & Paul Hubert, 2019. "The role of households' borrowing constraints in the transmission of monetary policy," Working Papers hal-03403257, HAL.
    3. Saleem Bahaj & Angus Foulis & Gabor Pinter & Paolo Surico, 2018. "Employment and the Collateral Channel of Monetary Policy," Discussion Papers 1832, Centre for Macroeconomics (CFM).
    4. 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.
    5. repec:hal:spmain:info:hdl:2441/5buvtkmlk091prrdje4a0tbkla is not listed on IDEAS
    6. Fergus Cumming & Paul Hubert, 2019. "The Role of Households' Borrowing Constraints in the Transmission of Monetary Policy This paper investigates how the transmission of monetary policy to the real economy depends on the distribution of ," Documents de Travail de l'OFCE 2019-20, Observatoire Francais des Conjonctures Economiques (OFCE).

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    More about this item

    Keywords

    Mortgages; interest rates; monetary policy; employment;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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