JOURNAL ARTICLE

Do Households React to Monetary Policy?

  • Published In: Management Science (INFORMS), 2026, v. 72, n. 5. P. 4517 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Li, You; Tan, Weiqiang; Yao, Daifei; Zhang, Jian 3 of 3

Abstract

This article examines how U.S. households understand and respond to monetary policy shocks by analyzing borrowers’ maximum requested interest rates on Prosper.com, a peer-to-peer crowdfunding lending platform. The study finds that borrowers adjust their willingness-to-pay interest rates significantly in response to unexpected Federal funds rate (FFR) changes, while anticipated changes have little effect. These responses are stronger among high-income, high-credit-score borrowers and large loan applicants, and are asymmetric—borrowers reduce rates notably after surprise rate cuts but show resistance to rate increases. Lenders partially moderate these borrower adjustments, resulting in only about half of the proposed rate changes passing through to final borrowing costs. Complementary analysis of retail investor behavior using Robinhood data reveals similar patterns, with investors reducing equity holdings following surprise rate hikes, highlighting the role of household expectations and Federal Reserve communication transparency in monetary policy transmission.

Additional Information

  • Source:Management Science (INFORMS). 2026/05, Vol. 72, Issue 5, p4517
  • Document Type:Article
  • Subject Area:Business and Management
  • Publication Date:2026
  • ISSN:0025-1909
  • DOI:10.1287/mnsc.2024.04649
  • Accession Number:193596740
  • Copyright Statement:Copyright of Management Science (INFORMS) is the property of INFORMS: Institute for Operations Research & the Management Sciences and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

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