Mortgages and Monetary Policy

Carlos Garriga (), Finn E. Kydland and Roman Sustek
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Finn E. Kydland: University of California–Santa Barbara and NBER

No 751, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Mortgages are prime examples of long-term nominal loans. As a result, under incomplete asset markets, monetary policy can affect household decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. These channels are distinct from the transmission through real interest rates. A stylized general equilibrium model in corporating these features is developed. Persistent monetary policy shocks, resembling the level factor in the nominal yield curve, have larger real effects than transitory shocks. The transmission is stronger under adjustable-than fixed-rate mortgages. Higher, persistent, inflation benefits homeowners under FRMs but hurts them under ARMs.

Keywords: Mortgages; Debt servicing costs; Monetary policy; Residential investment (search for similar items in EconPapers)
JEL-codes: E32 E52 G21 R21 (search for similar items in EconPapers)
Date: 2015-08-13
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Citations: View citations in EconPapers (9)

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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 (2013)
Working Paper: Mortgages and monetary policy (2013)
Working Paper: Mortgages and Monetary Policy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:751

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