Extra Seminar: Does Monetary Policy Affect Family Formation? The Effect of Mortgage Interest Rate Pass-through on FertilityISER Internal Seminars

When central banks reduce policy interest rates, families with a mortgage experience a large increase in disposable income if they are able to benefit from lower monthly payments. If children are “normal”, this could increase the demand for children. We examine this empirically using administrative data on mortgages and births in the UK. Our identification strategy exploits variation in the timing of when families were eligible for a mortgage interest rate adjustment, coupled with the large reductions in the monetary policy rate that occurred in the financial crisis, to estimate how policy-induced changes in mortgage rates affect conception rates. We estimate that accommodative monetary policy increased the UK birth rate by 7 percent in late 2008 and 2009. Our results provide new evidence on monetary policy transmission to the real economy and suggest that contractual rigidities in the mortgage market play a role in explaining pro-cyclical fertility.

Presented by:

Lisa Dettling, Federal Reserve Board/Bank of England

Date & time:

April 29, 2019 3:00 pm - April 29, 2019 4:15 pm


2N2.4.16 - ISER large seminar room

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