Mortgage Prepayment and Path-dependent Effects of Monetary Policy

David W. Berger, Konstantin Milbradt, Fabrice Tourre, Joseph Vavra

Publikation: Working paperForskning

Abstrakt

How much ability does the Fed have to stimulate the economy by cutting interest rates? We argue that the presence of substantial debt in fixed-rate, prepayable mortgages means that the ability to stimulate the economy by cutting interest rates depends not just on their current level but also on their previous path. Using a household model of mortgage prepayment matched to detailed loan-level evidence on the relationship between prepayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimulus.
OriginalsprogEngelsk
Udgivelses stedCambridge, MA
UdgiverNational Bureau of Economic Research (NBER)
Antal sider58
DOI
StatusUdgivet - 2018
NavnNational Bureau of Economic Research. Working Paper Series
Nummer25157
ISSN0898-2937

Citationsformater

Berger, D. W., Milbradt, K., Tourre, F., & Vavra, J. (2018). Mortgage Prepayment and Path-dependent Effects of Monetary Policy. National Bureau of Economic Research (NBER). National Bureau of Economic Research. Working Paper Series, Nr. 25157 https://doi.org/10.3386/w25157