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The Unequal Effect of Interest Rates by Race, Gender

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Abstract

Household spending typically falls as interest rates rise, but the responses vary by race and gender. Data show that households with mortgages headed by white women cut their spending on durable goods about a quarter percentage point in the three years following a 1 percentage point increase in interest rates. This is a much larger reduction than for households with mortgages headed by white men or Black men or women. The differences highlight the challenge of understanding how policy interest rate changes affect a diverse population.

Suggested Citation

  • Aina Puig, 2022. "The Unequal Effect of Interest Rates by Race, Gender," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2022(19), pages 1-5, August.
    • Handle: RePEc:fip:fedfel:94539
    Note: This Economic Letter was developed through the San Francisco Fed’s Unlocking Our Potential essay contest for graduate students.
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    References listed on IDEAS

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    1. Stephanie Seguino & James Heintz, 2012. "Monetary Tightening and the Dynamics of US Race and Gender Stratification," American Journal of Economics and Sociology, Wiley Blackwell, vol. 71(3), pages 603-638, July.
    2. James Cloyne & Clodomiro Ferreira & Paolo Surico, 2020. "Monetary Policy when Households have Debt: New Evidence on the Transmission Mechanism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(1), pages 102-129.
    3. Coibion, Olivier & Gorodnichenko, Yuriy & Kueng, Lorenz & Silvia, John, 2017. "Innocent Bystanders? Monetary policy and inequality," Journal of Monetary Economics, Elsevier, vol. 88(C), pages 70-89.
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