The Foreign Currency Fisher Channel: Evidence from Households
From Gyozo Gyongyosi, Judit Rariga and Emil Verner
This paper studies how households adjust consumption and labor supply to a large revaluation of foreign currency-denominated household debt. Our analysis uses detailed household-level data during Hungary’s large depreciation in 2008. Relative to similar local currency debtors, foreign currency debtors reduce consumption expenditures one-for-one with increased debt service, consistent with a foreign currency Fisher channel of the depreciation. Foreign currency debtors reduce both the quantity and quality of expenditures, consistent with a “flight from quality.” Debt revaluation does not affect overall labor supply, but there is a small adjustment toward foreign income streams and a substantial increase in home production.
Featured Publication
Gyongyosi, Gyozo, Judit Rariga, and Emil Verner, MIT Sloan Working Paper 6835-22. Cambridge, MA: MIT Sloan School of Management, December 2022.
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