Mortgages, cash-flow shocks and local employment

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 21 December 2018

Staff Working Paper No. 773

By Fergus Cumming

This paper quantifies the local impact of monetary policy through the cash-flow channel during the Crisis by combining novel micro datasets with near-universal coverage of UK mortgages and employment. I estimate that a reduction in mortgage payments equivalent to 1% of household income led to around a 5 percentage point increase in employment growth in non-tradable businesses the following year. But the spatial distribution of mortgage and labour market structures resulted in significant heterogeneity of this effect across the country. Taken at face value, the estimates suggest that the overall effect of accommodative monetary policy on total employment growth in 2010 varied by around 1.5 percentage points across regions.

PDFMortgages, cash-flow shocks and local employment

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