Using a novel source of quasi-experimental variation in interest rates, we develop a new approach to estimating the Elasticity of Intertemporal Substitution (EIS). In the UK, the mortgage interest rate features discrete jumps – notches – at thresholds for the loan-to-value (LTV) ratio. These...

Using a long span of expenditure survey data and a new narrative measure of exogenous income tax changes for the United Kingdom, we show that households with mortgage debt exhibit large and persistent consumption responses to changes in their income. Homeowners without a mortgage, in contrast,...

Using a novel source of quasi-experimental variation in interest rates, we study the response of household debt and intertemporal consumption allocation to interest rates. We also develop a new approach to structurally estimate the Elasticity of Intertemporal Substitution (EIS). In the United...

Using a novel source of quasi-experimental variation in interest rates, we develop a new approach to estimating the Elasticity of Intertemporal Substitution (EIS). In the UK, the mortgage interest rate features discrete jumps - notches - at thresholds for the loan-to-value (LTV) ratio. These...