Job Market Paper
Learning About the Macroeconomy Through Mortgages: Evidence from a Natural Experiment LINK
Household beliefs about the macroeconomy play a central role in the transmission of monetary policy. I study how adjustable-rate mortgages shape the effect of rising interest rates on household beliefs, using detailed Finnish data that link administrative mortgage records with survey-based beliefs. Exploiting the increase in market rates and the variation in the timing of mortgage payment adjustments, I find that mortgage borrowers update their macroeconomic beliefs more than homeowners without mortgages and renters. After rates rise, mortgage borrowers become more pessimistic about general borrowing conditions and predict lower inflation than homeowners without mortgages and renters, even though all groups face the same macroeconomic environment. These shifts are driven by two complementary mechanisms: an attention-based mechanism, where holding a mortgage creates stronger incentives to follow macroeconomic developments, and an experience-based mechanism, where households extrapolate from their own higher mortgage payments to form beliefs about the general borrowing environment. As a result of the increase in interest rates, mortgage borrowers’ inflation forecasts become more accurate relative to homeowners without mortgages and renters, suggesting that adjustable-rate loans are an important channel for monetary policy transmission and can serve as an information channel for households.
Publications:
The Indirect Effect of mRNA-based COVID-19 Vaccination on Healthcare Workers’ Unvaccinated Household Members In Nature Communications (2022) 13:1162 with M.Hagg, M. Kortelainen, T. Leino, T. Saxell, M. Siikanen & L. Sääksvuori
Working Papers:
Unexpected vs. Expected Worsening: The Role of Expectations in Household Financial Distress
Abstract:
This paper examines the role of expectations in shaping household financial outcomes when their financial situation deteriorates. Using linked Finnish household survey and administrative data from 2007 to 2018, I find that financial distress increases when a household’s financial situation worsens, regardless of whether the decline was anticipated. Contrary to standard economic intuition, expecting a deterioration does not significantly reduce the likelihood of financial distress compared with an unexpected decline. To shed light on this result, I examine mechanisms and find that consumption commitments, particularly housing costs, play a key role. When a household has high consumption commitments relative to income, it is more likely to experience financial distress during periods of worsening financial conditions than when those commitments are low. These findings suggest that the ability to anticipate financial difficulties does not necessarily translate into better financial resilience.
Dividend Taxation, Firms' Financial Decisions, and Firm Survival with J. Harju, J. Pirttilä and H. Selin
Abstract:
This paper examines the impacts of dividend tax changes on firm performance, utilizing quasi-experimental variation created by the Finnish corporate and dividend tax reform of 2005. Using a difference-in-differences design comparing firms with a dividend tax increase with firms facing little change in the tax burden, we find that the reform led to a clear reduction of dividend payouts among the companies facing the tax increase, without affecting the real economic behaviour (investments or value added). We also investigate the consequences of the reform on firm resilience amid the financial crisis of 2008-2009, but find no difference in firms' survival probabilities depending on their tax treatment.