EconPapers    
Economics at your fingertips  
 

Regional heterogeneity and monetary policy

Martin Beraja, Andreas Fuster (), Erik Hurst () and Joseph Vavra ()
Additional contact information
Martin Beraja: MIT and NBER

No 731, Staff Reports from Federal Reserve Bank of New York

Abstract: We argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending responses to interest rate cuts but that these effects vary over time with changes in the regional distribution of house price growth and unemployment. We then build a heterogeneous household model of refinancing and use it to explore the aggregate implications for monetary policy arising from our regional evidence. We find that the 2008 equity distribution made spending in depressed regions less responsive to interest rate cuts, thus dampening aggregate stimulus and increasing regional consumption inequality, whereas the opposite occurred in some earlier recessions. Taken together, our results strongly suggest that monetary policymakers should track the regional distribution of equity over time.

Keywords: monetary policy; regional inequality; quantitative easing; mortgage refinancing (search for similar items in EconPapers)
JEL-codes: E21 E52 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-lab, nep-mac, nep-mon, nep-opm and nep-ure
Date: 2015-06-01, Revised 2017-08-01
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://www.newyorkfed.org/research/staff_reports/sr731.html Summary (text/html)
https://www.newyorkfed.org/medialibrary/media/rese ... orts/sr731.pdf?la=en Full text (application/pdf)

Related works:
Working Paper: Regional Heterogeneity and Monetary Policy (2017) Downloads
Working Paper: Regional Heterogeneity and Monetary Policy (2017) Downloads
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:fip:fednsr:731

Ordering information: This working paper can be ordered from
http://www.ny.frb.org/rmaghome/staff_rp/

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Series data maintained by Amy Farber ().

 
Page updated 2017-12-03
Handle: RePEc:fip:fednsr:731