Mortgages and Monetary Policy

Roman Sustek, Finn Kydland and Carlos Garriga ()
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Finn Kydland: University of California, Santa Barbara

No 500, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: Mortgages are a prime example of long-term nominal loans. As a result, under incomplete asset markets, monetary policy affects household decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. These channels are distinct from the transmission through the real interest rate. A general equilibrium model incorporating these features is developed. Persistent monetary policy shocks, resembling the level factor in the nominal yield curve, have larger real effects than transitory shocks. The transmission is stronger under adjustable- than fixed-rate mortgages. Higher inflation benefits homeowners under FRMs but hurts them under ARMs.

Date: 2015
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-ure
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Mortgages and Monetary Policy (2017)
Working Paper: Mortgages and Monetary Policy (2016)
Working Paper: Mortgages and Monetary Policy (2015)
Working Paper: Mortgages and Monetary Policy (2015)
Working Paper: Mortgages and monetary policy (2013)
Working Paper: Mortgages and monetary policy (2013)
Working Paper: Mortgages and Monetary Policy (2013)
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