Estimating the Elasticity of Intertemporal Substitution Using Mortgage Notches

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 U.K., the mortgage interest rate features discrete jumps—notches—at thresholds for the loan-to-value (LTV) ratio. These notches g...

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Bibliographic Details
Published in:The Review of economic studies 2020-03, Vol.87 (2 (313)), p.656-690
Main Authors: BEST, MICHAEL CARLOS, CLOYNE, JAMES S., ILZETZKI, ETHAN, KLEVEN, HENRIK J.
Format: Article
Language:English
Subjects:
Interest rates
Mortgages
Optimization
Portfolios
Quasi-experimental methods
Risk preferences
Thresholds
Uncertainty
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