Mortgage Prepayment and Path-Dependent Effects of Monetary Policy

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

Mortgage Prepayment and Path-Dependent Effects of Monetary Policy

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

Institut for Finansiering

Publikation: Konferencebidrag › Paper › Forskning › peer review

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 repayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimulus.

Originalsprog	Engelsk
Publikationsdato	2019
Antal sider	58
Status	Udgivet - 2019
Begivenhed	Consumer Finance: Micro and Macro Approaches - Becker Friedman Institute, University of Chicago, Chicago, USA Varighed: 10 maj 2019 → 11 maj 2019 https://bfi.uchicago.edu/event/consumer-finance-micro-and-macro-approaches/

Konference

Konference	Consumer Finance: Micro and Macro Approaches
Lokation	Becker Friedman Institute, University of Chicago
Land	USA
By	Chicago
Periode	10/05/2019 → 11/05/2019
Internetadresse	https://bfi.uchicago.edu/event/consumer-finance-micro-and-macro-approaches/

Emneord

Monetary policy
Path-dependence
Refinancing
Mortgage debt

Adgang til dokumentet

https://drive.google.com/file/d/1jiRcTxO7_dH81NINP9DVDlMzkhJRC0RU/viewLicens: Ikke-specificeret

Citationsformater

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keywords = "Monetary policy, Path-dependence, Refinancing, Mortgage debt, Monetary policy, Path-dependence, Refinancing, Mortgage debt",

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T1 - Mortgage Prepayment and Path-Dependent Effects of Monetary Policy

AU - Berger, David W.

AU - Milbradt, Konstantin

AU - Tourre, Fabrice

AU - Vavra, Joseph

PY - 2019

Y1 - 2019

N2 - 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 repayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimulus.

AB - 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 repayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimulus.

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KW - Path-dependence

KW - Refinancing

KW - Mortgage debt

KW - Monetary policy

KW - Path-dependence

KW - Refinancing

KW - Mortgage debt

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Y2 - 10 May 2019 through 11 May 2019

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