Empirical Macro-Finance Seminar

Speaker: Soyoung Lee (Bank of Canada)

Title: The household credit channel of monetary policy: A bottom-up approach

Discussant: Aaron Hedlund (University of Missouri)

Abstract: Monetary policy-induced interest rate changes of mortgages reach households differentially with heterogeneous credit and consumption implications. Using Canadian microdata, we identify an asymmetry between consumers with high and low credit risks. We find that while mortgage balances fall to a positive monetary policy shock on average, households with high credit score decreases their mortgage balance less. We integrate these insights into a New Keynesian heterogeneous agent lifecycle model with housing and mortgages, to study the effects of households credit on the transmission of monetary policy.