State Dependent Effects of Monetary Policy: the Refinancing Channel

Sergio Rebelo (), Martin Eichenbaum and Arlene Wong

No 13223, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies how the impact of monetary policy depends on the dis- tribution of savings from refinancing mortgages. We show that the efficacy of monetary policy is state dependent, varying in a systematic way with the pool of potential savings from refinancing. We construct a quantitative dynamic life-cycle model that accounts for our findings and use it to study how the response of consumption to a change in mortgage rates depends on the distribution of savings from refinancing. These effects are strongly state dependent. We also use the model to study the impact of a long period of low interest rates on the potency of monetary policy. We find that this potency is substantially reduced both during the period and for a substantial amount of time after interest rates renormalize.

Keywords: Monetary policy; State dependency; Refinancing; Mortgages (search for similar items in EconPapers)
JEL-codes: E52 G21 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
https://cepr.org/publications/DP13223 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: State-Dependent Effects of Monetary Policy: The Refinancing Channel (2022)
Working Paper: State Dependent Effects of Monetary Policy: the Refinancing Channel (2020)
Working Paper: State Dependent Effects of Monetary Policy: the Refinancing Channel (2018)
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:cpr:ceprdp:13223

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13223

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().