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Federal Reserve Bank of Boston
Working Papers
The effects of changes in local-bank health on household consumption
Daniel H. Cooper
Joe Peek
Abstract

Focusing on localized measures of bank health and economic activity, and renters as well as homeowners, this paper uses an innovative approach to identifying households likely in need of credit to investigate the effect on household spending of a deterioration in local-bank health. The analysis shows that local-bank health tends to impact the expenditures of renters more than homeowners, with the strongest effects for households that likely need credit—those experiencing a negative income shock and having limited liquid wealth. These findings contribute to the discussion of the linkages between the financial sector and real economic activity.


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Daniel H. Cooper & Joe Peek, The effects of changes in local-bank health on household consumption, Federal Reserve Bank of Boston, Working Papers 18-5, 01 Oct 2018.
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Keywords: consumption; local-bank health; credit constraints
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