Research

Do women respond differently to income shocks than men? We use questions from the NY Fed Survey of Consumer Expectations that ask how women and men would adjust to an unexpected 10% change in income. Women are more likely to repay debt after an unexpected increase in income, where men have a larger marginal propensity to consume. When asked about how to buffer a decrease in income, both men and women report large reductions in spending, but women reduce spending more than men. Differences in debt adjustment are related to gender differences in the debt-toincome ratio, the degree of discouraged borrowing and liquidity constraints, where women are more likely to be constrained. Together these three variables explain about 40% of the gender differences in the marginal propensity to repay debt, and 75% of differences in the marginal propensity to borrow. A simple model with occasionally binding borrowing constraints can rationalize the gender differences in the marginal propensities to consume and adjust debt.

The probability a household refinances their mortgage depends on both the likelihood a household applies for refinancing and the probability its application is approved by the recipient financial institution. This paper develops a model that identifies the household-level probability of approval separately from the application probability. The paper then investigates the distributional impact of credit constraints on the transmission of monetary policy through the mortgage refinancing channel in the U.S. economy. During an average month, households with high loan amounts, low incomes, as well as Black, Hispanic and Female households are most negatively affected by credit constraints. Through different monetary policy experiments, the paper shows that the effect of credit constraints is large in magnitude and amplifies refinancing heterogeneity in time, as specific groups are consistently unable to take advantage of lower mortgage rates. Finally, the paper examines the distributional effects to households after banks tighten credit standards. Under tighter credit conditions, households with high loan amounts, low to middle income levels, Hispanic and Asian or Pacific Islander and Female households experience the largest decrease in refinancing approvals. These findings reveal the households that are most negatively affected by credit constraints and thus in most need of streamlined refinancing programs.

Household financial decisions and their subjective expectations about macroeconomic outcomes vary within and across countries and change over time according to the new Consumer Expectations Survey of the ECB. To rationalize the role of subjective expectations for financial decisions, we estimate a structural model in which households decide how much to save under their survey-reported subjective expectations about the macroeconomy. We find that households in Italy and Spain save between 4 and 14 percentage points more under subjective expectations compared to what they would have saved under rational expectations. We also use the model to determine saving rates differences between countries and show that households in Italy save between 15 and 20 percentage points less than their European neighbors. We further decompose the variation in savings rates by focusing on the impact of expectations, preferences and income risk. Notably, German households save less than their European counterparts due to income risk and French households save less than other countries due to their preferences.