Mortgage rate systems vary in practice across countries, and understanding the impact of these differences is critical to the design of optimal monetary policy. This column focuses on the US, where most mortgages have a fixed interest rate and no prepayment penalties, and demonstrates that the efficacy of monetary policy is state dependent, varying in a systematic way with the pool of potential savings from refinancing. As refinancing costs decline, the effects of monetary policy become less state dependent.
Martin Eichenbaum, Sérgio Rebelo, Arlene Wong, 02 December 2018
Richard Baldwin, 20 November 2007
In a May 2007 essay, Martin Feldstein argued that a drop in US mortgage refinancing would raise US personal saving and this would necessitate a fall in the dollar. That’s looking pretty good at the moment. Here his basic logic is explained.
Most Read
Blogs&Reviews
Vox eBooks
Vox Talks
Events
-
28 - 29 March 2019 / Paris / SUERF - The European Money and Finance Forum Banque de France (BDF)
-
28 - 29 March 2019 / European Central Bank, Frankfurt / European Central Bank and the University of Ohio
-
1 - 3 April 2019 / Florence, Italy / Florence School of Banking and Finance, European University Institute
-
8 - 10 April 2019 / Florence, Italy / Florence School of Banking and Finance, European University Institute
-
3 - 4 May 2019 / London / Queen Mary, University of London
