Monetary Policy Transmission to Consumer Financial Stress and Durable Consumption

33 Pages Posted: 10 Jun 2019

See all articles by Dimitris Georgarakos

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Konstantinos Tatsiramos

University of Luxembourg; Luxembourg Institute of Socio-Economic Research (LISER)

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We examine the effects of monetary policy on household self-assessed financial stress and durable consumption using panel data from eighteen annual waves of the British Household Panel Survey. For identification, we exploit random variation in household exposure to interest rates generated by the random timing of household interview dates with respect to policy rate changes. After accounting for household and month-year-of-interview fixed effects, we uncover significant heterogeneities in the way monetary policy affects household groups that differ in housing and saving status. In particular, an increase in the interest rate induces financial stress among mortgagors and renters, while it lessens financial stress of savers. We find symmetric effects on durable consumption, mainly driven by mortgagors with high debt burden or limited access to liquidity and younger renters who are prospective home buyers.

Keywords: monetary policy, mortgage debt, debt burden, financial stress, consumption

JEL Classification: G21, E21

Suggested Citation

Georgarakos, Dimitris and Tatsiramos, Konstantinos, Monetary Policy Transmission to Consumer Financial Stress and Durable Consumption. IZA Discussion Paper No. 12359, Available at SSRN: or

Dimitris Georgarakos (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323

Konstantinos Tatsiramos

University of Luxembourg ( email )

L-1511 Luxembourg

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366

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