Researchers from Federal Reserve Board Detail Findings in Economics (Effects of Monetary Policy On Household Expectations: the Role of Homeownership): Economics

Economics Daily Report

2024 OCT 09 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Research findings on Economics are discussed in a new report. According to news originating from Washington, District of Columbia, by NewsRx correspondents, research stated, “We study the role of homeownership in the effectiveness of monetary policy on households’ expectations based on individual-level microdata in the U.S. We find that homeowners lower their near-term inflation expectations and optimism about the labor market outlook in response to a rise in mortgage rates, while renters are less likely to do so.”

Our news journalists obtained a quote from the research from Federal Reserve Board, “We further show that forward guidance shocks lead to similar differences between homeowners and renters. Our results suggest that homeowners pay attention to news on interest rates and adjust their expectations accordingly in a manner consistent with the intended effect of monetary policy. We characterize this empirical finding with a rational inattention model where mortgage payments create an incentive for homeowners to acquire information on monetary policy, unlike renters.”

According to the news editors, the research concluded: “This housing-driven endogenous attentiveness is the key mechanism behind the compelling empirical link among homeownership, attention, and the transmission of monetary policy.”

This research has been peer-reviewed.

For more information on this research see: Effects of Monetary Policy On Household Expectations: the Role of Homeownership. Journal of Monetary Economics, 2024;147. Journal of Monetary Economics can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of Monetary Economics - http://www.journals.elsevier.com/journal-of-monetary-economics/)

The news correspondents report that additional information may be obtained from Hie Joo Ahn, Federal Reserve Board, Washington, DC 20551, United States. Additional authors for this research include Choongryul Yang and Shihan Xie.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jmoneco.2024.103599. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.