How does the transmission of monetary policy depend on the distribution of debt in the economy? In this blog post we argue that interest rate changes are most powerful when a large share of households are financially constrained. That is, when a higher proportion of all borrowers are close to their borrowing limits. Our findings also suggest that the overall impact of monetary policy partly depends on the behaviour of house prices, and might not be symmetric for interest rate rises and falls. In a recent paper we use the universe of UK loan-level mortgage data to construct an accurate measure of the proportion of ... (full story)