Mortgages and monetary policy

Carlos Garriga (), Finn E. Kydland and Roman Sustek

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the role of such loans in monetary transmission may be important. A general equilibrium model is developed to address this question. The transmission is found to be stronger under adjustable- than fixed-rate contracts. The source of impulse also matters: persistent inflation shocks have larger effects than cyclical fluctuations in inflation and nominal interest rates.

Keywords: mortgages; debt servicing costs; monetary policy; transmission mechanism; housing investment (search for similar items in EconPapers)
JEL-codes: E32 E52 G21 R21 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2013-12-05
New Economics Papers: this item is included in nep-ban, nep-dge, nep-mac, nep-mon and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://eprints.lse.ac.uk/58248/ Open access version. (application/pdf)

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 (2015)
Working Paper: Mortgages and monetary policy (2013)
Working Paper: Mortgages and Monetary Policy (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:58248

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().