Working Paper: CEPR ID: DP6934
Authors: Timothy J. Besley; Neil Meads; Paolo Surico
Abstract: This paper uses mortgage data to construct a measure of terms on which households access to external finance, and relates it to consumption at both the aggregate and cohort levels. The Household External Finance (HEF) index is based on the spread paid by risky borrowers in the mortgage market. There is evidence that the terms of access to external finance matter more for the consumption of young cohorts in U.K. data. Results are robust to a wide variety of specifications.
Keywords: birth cohorts; external finance; household consumption; pseudo panels; terms of access
JEL Codes: D10; E21; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| credit conditions (F34) | household behavior (D10) |
| household external financing cost (HEF index) (G59) | consumption growth (E20) |
| increase in household external financing cost (HEF index) (G59) | decrease in consumption growth (E20) |
| household external financing cost (HEF index) (G59) | consumption growth (younger cohorts) (E20) |