State Dependent Effects of Monetary Policy: the Refinancing Channel

Sergio Rebelo (), Martin Eichenbaum and Arlene Wong ()

No 13223, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies how the impact of monetary policy depends on the dis- tribution of savings from refinancing mortgages. We show that the efficacy of monetary policy is state dependent, varying in a systematic way with the pool of potential savings from refinancing. We construct a quantitative dynamic life-cycle model that accounts for our findings and use it to study how the response of consumption to a change in mortgage rates depends on the distribution of savings from refinancing. These effects are strongly state dependent. We also use the model to study the impact of a long period of low interest rates on the potency of monetary policy. We find that this potency is substantially reduced both during the period and for a substantial amount of time after interest rates renormalize.

Keywords: Monetary policy; State dependency; Refinancing; Mortgages (search for similar items in EconPapers)
JEL-codes: E52 G21 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Related works:
Journal Article: State-Dependent Effects of Monetary Policy: The Refinancing Channel (2022)
Working Paper: State Dependent Effects of Monetary Policy: the Refinancing Channel (2020)
Working Paper: State Dependent Effects of Monetary Policy: the Refinancing Channel (2018)
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