Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market

Steffen Andersen, John Campbell, Kasper Meisner Nielsen and Tarun Ramadorai

No 21386, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We build an empirical model to decompose delays in mortgage refinancing into time-dependent inaction (a low probability of responding to a refinancing incentive in a given quarter) and state- dependent inaction (a psychological addition to the financial cost of refinancing). We estimate the model on high-quality administrative panel data from Denmark, where mortgage refinancing without cash-out is unconstrained. Middle-aged and wealthy households exhibit state-dependent inaction; but older, poorer, and less-educated households exhibit strong time-dependent inaction and thereby achieve lower savings. We use the model to understand frictions in the mortgage channel of monetary policy transmission.

JEL-codes: G11 G21 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-ure
Note: AP ME
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Citations: View citations in EconPapers (22)

Published as Steffen Andersen & John Y. Campbell & Kasper Meisner Nielsen & Tarun Ramadorai, 2020. "Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market," American Economic Review, American Economic Association, vol. 110(10), pages 3184-3230, October.
Published as Steffen Andersen & John Y. Campbell & Kasper Meisner Nielsen & Tarun Ramadorai, 2020. "Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market," American Economic Review, vol 110(10), pages 3184-3230.

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