- Title
- Refinancing and The Transmission of Monetary Policy to Consumption
- Author(s)
- Arlene Wong Arlene Wong (Princeton University)
- Abstract
- This paper examines the role of the refinancing channel and the mortgage market structure for the transmission of monetary policy to consumption. First, I document heterogeneous consumption responses to monetary policy shocks. I find a large consumption response for homeowners who refinance or enter new loans, which is concentrated among younger people. Second, I develop a life-cycle model with fixed rate mortgages that explains these facts. Moving from a fixed to a variable rate mortgage structure reduces the heterogeneous effects of monetary policy on consumption by age. At the same time, the aggregate effects of monetary policy on consumption are increased substantially.
- Creation Date
- 2021-03
- Section URL ID
- Paper Number
- 2021-57
- URL
- https://static1.squarespace.com/static/576576adbe659449f97e0d35/t/60770bfec442b6095624f676/1618414592249/Paper_AERrevision2.pdf
- File Function
- Jel
- E52, E21
- Keyword(s)
- Consumption; monetary policy; refinancing; heterogeneous responses; age
- Suppress
- false
- Series
- 13