RDP 2016-12: The Household Cash Flow Channel of Monetary Policy Appendix A: Full Regression Output

Gianni La Cava, Helen Hughson and Greg Kaplan

December 2016

The results of estimating Equation (1) for the whole sample, the hand-to-mouth household sample and the non-hand-to-mouth household sample are shown in Table A1. The measurement and definitions for each of the control variables is shown below (with associated HILDA Survey mnemonics shown where relevant):

  • Interest-sensitive cash flows: For borrowers, this is equal to required mortgage repayments (calculated from a credit-foncier model). For lenders, this is equal to interest income on deposit accounts as reported by each surveyed individual (OIFINTA) and aggregated across all individuals within each household.
  • Other cash flows: For borrowers, this is equal to disposable income (HIFDITP – HIFDITN). For lenders, this is equal to disposable income less required mortgage repayments and interest income (as calculated above).
  • Home debt: Each household's estimate of their current holdings of owner-occupier housing debt (HSMGOWE + HSSLOWE)
  • Home equity: Each household's subjective estimate of the current value of their home (HSVALUI) less their estimate of their current holdings of owner-occupier housing debt (HSMGOWE + HSSLOWE)
  • Age: The age of the household head (where the age is restricted to be between 18 and 80 years of age) (HGAGE)
  • Home owner: A dummy variable equal to one if the household reportedly owns their home and equal to zero otherwise (HSTEW = 1)
  • Mortgagor: A dummy variable equal to one if the household owns their home and has outstanding owner-occupier housing debt and equal to zero otherwise (HSMGOWE + HSSLOWE > 0)
  • Refinanced: A dummy variable equal to one if the household reports to have refinanced their mortgage in that survey year and equal to zero otherwise (HSEVREF = 1)
  • Moved home: A dummy variable equal to one if the household reports to have moved home since the last survey and equal to zero otherwise (HHMOVE = 1)
  • Employed: A dummy variable equal to one if the household head's employment status is employed and equal to zero otherwise (the baseline is being unemployed) (ESBRD = 1)
  • Not in the labour force: A dummy variable equal to one if the household head's employment status is not in the labour force and equal to zero otherwise (the baseline is being unemployed) (ESBRD = 3)
Table A1: Consumption Response to Interest-sensitive Cash Flows
  All households   HtM households   Non-HtM households
Borrowers Lenders Borrowers Lenders Borrowers Lenders
Interest-sensitive cash flows −0.27***
(−2.62)		 0.02**
(2.35)		   −0.36*
(−1.66)		 0.04*
(1.76)		   −0.23*
(−1.94)		 0.02*
(1.82)
Other cash flows 0.44***
(3.20)		 0.18***
(3.71)		   0.68***
(3.46)		 0.30**
(2.11)		   0.24
(1.25)		 0.16***
(3.11)
Log of home debt 0.13
(1.30)		 −0.11**
(−2.39)		   0.16
(0.76)		 −0.24*
(−1.67)		   0.13
(1.20)		 −0.07
(−1.52)
Log of home equity 0.02
(0.47)		 −0.02
(−0.50)		   −0.05*
(−1.69)		 −0.05
(−0.63)		   0.09
(1.42)		 −0.01
(−0.35)
Age −0.17*
(−1.67)		 0.24***
(3.53)		   −0.31*
(−1.66)		 0.17
(1.35)		   −0.08
(−0.64)		 0.25***
(3.10)
Age squared 0.00
(1.64)		 −0.00***
(−3.23)		   0.00
(1.43)		 −0.00
(−0.79)		   0.00
(0.85)		 −0.00***
(−3.05)
Home owner   0.48
(0.92)		     0.76
(0.72)		     0.45
(0.85)
Mortgagor 2.39***
(3.16)		 1.23**
(2.32)		     2.50
(1.60)		   2.05**
(2.15)		 0.86
(1.53)
Refinanced 0.15
(0.72)		 0.54
(1.02)		   −0.00
(−0.01)		 −0.82
(−0.82)		   0.33
(1.03)		 1.05**
(2.00)
Moved home 0.35***
(3.15)		 0.27***
(3.15)		   0.41**
(2.25)		 0.25
(1.50)		   0.31**
(2.16)		 0.28***
(2.95)
Employed 0.66*
(1.88)		 0.50***
(2.66)		   0.71
(1.58)		 0.41
(1.26)		   0.53
(0.95)		 0.61***
(2.69)
Not in the labour force 0.19
(0.43)		 0.38*
(1.82)		   0.46
(0.85)		 0.13
(0.36)		   −0.26
(−0.35)		 0.56**
(2.23)
Constant 4.48*
(1.75)		 −2.71
(−1.43)		   8.73**
(2.14)		 −3.88
(−1.16)		   3.41
(1.04)		 −2.24
(−0.97)
R2 0.010 0.008   0.017 0.009   0.011 0.010
Observations 5,185 12,163   2,161 3,284   2,994 8,879

Notes: ***, ** and * denote statistical significance at the 1, 5 and 10 per cent levels, respectively; t statistics shown in parentheses; standard errors are clustered by household; coefficient estimates on control variables are omitted

Sources: Authors' calculations; HILDA Survey Release 14.0