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Mortgage Cash-flows and Employment

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  • Fergus Cumming

    (Centre for Macroeconomics (CFM)
    Bank of England)

Abstract

This paper quantifies the impact of the cash-flow channel of monetary policy on employment by combining novel micro datasets with near-universal coverage. When policy interest rates fall, families with a mortgage spend the extra cash-flow in their local economy and this increases labor demand. Overall, a reduction in mortgage payments of £1,000 per household led to a 0.3 percentage point increase in locally non-tradable employment growth over three years of the Great Recession, with the most pronounced effects in the restaurant sector. Spatial variation in labor and mortgage market structures leads to regional heterogeneity in the traction of monetary policy.

Suggested Citation

  • Fergus Cumming, 2019. "Mortgage Cash-flows and Employment," Discussion Papers 1922, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:1922
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    More about this item

    Keywords

    Employment; Interest rates; Monetary policy; Mortgages;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • 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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