This note studies how decreases in mortgage rates affect the behaviour of borrowers in terms of spending on durable goods and repaying debt.
Staff Analytical Notes
Staff Working Papers
How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian ConsumersWe study the causal effect of mortgage rate changes on consumer spending, debt repayment, and defaults during an expansionary and a contractionary monetary policy episode in Canada. Our identification takes advantage of the fact that the interest rates of short-term fixed-rate mortgages (the dominant product in Canada’s mortgage market) have to be reset according to the prevailing market interest rates at predetermined time intervals.
This paper quantifies the effects of improving public equity markets on macroeconomic aggregates and welfare. I use an open-economy extension of Angeletos (2007), where entrepreneurs face idiosyncratic productivity risk in privately held firms.
This paper examines the relationship between house prices and consumption, through the use of debt. Using unique Canadian household-level data that reports the uses of debt, we begin by looking at the relationship between house prices and debt.
In this paper, I extend the results of Moskowitz and Vissing-Jørgensen (2002) on the returns to entrepreneurial investments in the United States. First, following the authors’ methodology I replicate the original findings from the Survey of Consumer Finances (SCF) for the period 1989–1998 and show that the returns to private and public equity are similar.
Bank of Canada Review articles
February 23, 2012 Understanding how much of the increased debt load of Canadian households has been used to finance household spending on consumption and home renovation is important for the conduct of monetary policy. In this article, the authors use a comprehensive data set that provides information on the uses of debt by Canadian households. They first present some facts regarding the evolution of Canadian household debt over the period from 1999 to 2010, emphasizing the increased importance of debt flows that are secured by housing. They then explore how Canadian households have used their borrowed funds over the same period, and assess the role of these borrowed funds in financing total consumption and spending on home renovation. Finally, they examine the possible effects of a decline in house prices on consumption when housing equity is used as collateral against household indebtedness.
- Kartashova, Katya, 2018. “Improving Public Equity Markets: No Pain, No Gain,” Economics Letters, vol. 162(1), pages 69-72.
- Kartashova, Katya & Tomlin, Ben, 2017. "House prices, consumption and the role of non-Mortgage debt," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 121-134.
- Kartashova, Katya, 2014. "Private Equity Premium Puzzle Revisited," American Economic Review, American Economic Association, vol. 104(10), pages 3297-3334, October.