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Hybrid Contracting in Repeated Interactions

Author

Listed:
  • Farzad Saidi

  • Ulf Nielsson
  • Jesper Rangvid
  • Fabian Seyrich
  • Daniel Streitz

Abstract

What stimulus payments replicate the consumption effect of a desired (but potentially infeasible) interest rate cut? Using granular full‐population administrative data, we estimate consumption responses to interest rate changes via adjustable‐rate mortgage resets and lump‐sum cash windfalls from unanticipated inheritances. Combining them, we map a 1 percentage point monetary‐policy rate decrease to equivalent uniform transfers of ~$1,000 per person paid over 5 years, totaling 1.3% of GDP. This estimate remains robust when accounting for heterogeneity in the cross‐sectional incidence of these macro‐equivalent policies. We find only modest heterogeneity in marginal propensities to consume, limiƟng efficiency gains from targeting transfers.

Suggested Citation

  • Farzad Saidi & Ulf Nielsson & Jesper Rangvid & Fabian Seyrich & Daniel Streitz, 2025. "Hybrid Contracting in Repeated Interactions," CRC TR 224 Discussion Paper Series crctr224_2025_699, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_699
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp699
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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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