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Does household mortgage debt influence the transmission of monetary policy in the United Kingdom?
[L’endettement immobilier des ménages influence-t-il la transmission de la politique monétaire au Royaume-Uni ?]

Author

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  • Hubert Paul

Abstract

Does monetary policy transmission in the United Kingdom depend on household mortgage debt? This article shows that changes in Bank of England base rates have a greater impact on consumption when a larger proportion of households are financially constrained and close to their borrowing limits. Moreover, the impact of monetary policy depends partly on the past house price developments and thus on households’ refinancing capacity. However, the effect of debt levels on monetary policy in the UK is not symmetrical: an increase in interest rates is more effective than a decrease because it pushes households towards their financial constraints. It therefore reduces their consumption relatively more than a decrease would increase it. La transmission de la politique monétaire au Royaume-Uni dépend-elle de la situation d’endettement immobilier des ménages ? Cet article montre que les variations des taux d’intérêt directeurs de la Banque d’Angleterre produisent un effet plus fort sur la consommation lorsqu’une plus grande partie des ménages sont contraints financièrement et proches de leurs limites d’emprunt immobilier. En outre, l’impact de la politique monétaire dépend en partie de la dynamique passée des prix immobiliers et donc de la capacité de refinancement des ménages. Toutefois, l’effet du niveau d’endettement sur la politique monétaire au Royaume-Uni n’est pas symétrique : la hausse des taux d’intérêt est plus efficace que la baisse car elle pousse les ménages vers leur contrainte financière. Elle réduit donc relativement plus leur consommation qu’une baisse ne l’accroît.

Suggested Citation

  • Hubert Paul, 2021. "Does household mortgage debt influence the transmission of monetary policy in the United Kingdom? [L’endettement immobilier des ménages influence-t-il la transmission de la politique monétaire au R," Bulletin de la Banque de France, Banque de France, issue 236.
    • Handle: RePEc:bfr:bullbf:2021:236:02
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    References listed on IDEAS

    as
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