The Effects of Changes in Local-Bank Health on Household Consumption

50 Pages Posted: 5 Oct 2018 Last revised: 21 Feb 2019

See all articles by Daniel Cooper

Daniel Cooper

Federal Reserve Bank of Boston

Joe Peek

Federal Reserve Banks - Federal Reserve Bank of Boston

Date Written: 2018-10-01

Abstract

Focusing on localized measures of bank health and economic activity, and renters as well as homeowners, this paper uses an innovative approach to identifying households likely in need of credit to investigate the effect on household spending of a deterioration in local-bank health. The analysis shows that local-bank health tends to impact the expenditures of renters more than homeowners, with the strongest effects for households that likely need credit—those experiencing a negative income shock and having limited liquid wealth. These findings contribute to the discussion of the linkages between the financial sector and real economic activity.

Keywords: consumption, local-bank health, credit constraints

JEL Classification: E21, G21

Suggested Citation

Cooper, Daniel H. and Peek, Joe, The Effects of Changes in Local-Bank Health on Household Consumption (2018-10-01). FRB of Boston Working Paper No. 18-5. Available at SSRN: https://ssrn.com/abstract=3260399

Daniel H. Cooper (Contact Author)

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
617-973-4220 (Phone)

Joe Peek

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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