Multiperiod Loans, Occasionally Binding Constraints, and Monetary Policy: A Quantitative Evaluation
Paolo Gelain () and
Marcin Kolasa ()
Authors registered in the RePEc Author Service: Michal Brzoza-Brzezina
Journal of Money, Credit and Banking, 2020, vol. 52, issue 7, 1691-1718
We introduce multiperiod mortgage loans, fixed interest rate, a lower bound constraint on newly granted loans, and a possibly slack collateral constraint, in an otherwise standard Dynamic Stochastic General Equilibrium (DSGE) model with housing. Our nonlinear estimation shows that all those features are important to understand the evolution of mortgage debt during the recent U.S. housing market boom and bust. The transmission of monetary policy becomes dependent on the housing cycle, with weaker effects when house prices are high or start falling sharply. Higher average loan duration makes monetary policy less effective, eventually leading to asymmetric responses to positive and negative monetary shocks.
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Working Paper: Multiperiod Loans, Occasionally Binding Constraints, and Monetary Policy: A Quantitative Evaluation (2019)
Working Paper: Multi-period loans, occasionally binding constraints and monetary policy: a quantitative evaluation (2019)
Working Paper: Multi-period loans, occasionally binding constraints and Monetary policy: a quantitative evaluation (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:52:y:2020:i:7:p:1691-1718
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