Mortgages and Monetary Policy

Carlos Garriga (), Finn Kydland and Roman Sustek

No 19744, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Mortgages are long-term loans with nominal payments. Consequently, under incomplete asset markets, monetary policy can affect housing investment and the economy through the cost of new mortgage borrowing and real payments on outstanding debt. These channels, distinct from traditional real rate channels, are embedded in a general equilibrium model. The transmission mechanism is found to be stronger under adjustable- than fixed-rate mortgages. Further, monetary policy shocks affecting the level of the nominal yield curve have larger real effects than transitory shocks, affecting its slope. Persistently higher inflation gradually benefits homeowners under FRMs, but hurts them immediately under ARMs.

JEL-codes: E32 E52 G21 R21 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-ure
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Published as Carlos Garriga & Finn E. Kydland & Roman Šustek, 2017. "Mortgages and Monetary Policy," The Review of Financial Studies, vol 30(10), pages 3337-3375.

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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)
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