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Refinancing, Monetary Policy, and the Credit Cycle

Author

Listed:
  • Gene Amromin
  • Neil Bhutta
  • Benjamin J. Keys

Abstract

We assess the complicated reality of monetary policy transmission through mortgage markets by synthesizing the existing literature on the role of refinancing in policy implementation. After briefly reviewing mortgage market institutions in the U.S. and documenting refinance activity over time, we summarize the links between refinancing and consumption, and describe the frictions impeding the refinancing channel. The paper draws heavily on research emerging from the experience of the financial crisis of 2008-09, as it highlights a combination of market, institutional, and policy-making factors that dulled the transmission mechanism. We conclude with a discussion of potential mortgage market innovations, and the applicability of lessons learned to the ongoing stresses induced by the COVID-19 pandemic.

Suggested Citation

  • Gene Amromin & Neil Bhutta & Benjamin J. Keys, 2020. "Refinancing, Monetary Policy, and the Credit Cycle," NBER Working Papers 28039, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:28039
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    Cited by:

    1. Andreas Fuster & Aurel Hizmo & Lauren Lambie-Hanson & James Vickery & Paul S. Willen, 2021. "How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic," Working Papers 21-4, Federal Reserve Bank of Boston.
    2. Koel Roychowdhury & Radhika Bhanja & Sushmita Biswas, 2022. "Mapping the research landscape of Covid-19 from social sciences perspective: a bibliometric analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 127(8), pages 4547-4568, August.
    3. Mallick Hossain & Igor Livshits & Collin Wardius, 2023. "Not Cashing In on Cashing Out: An Analysis of Low Cash-Out Refinance Rates," Working Papers 23-04, Federal Reserve Bank of Philadelphia.
    4. Giacomo Rella, 2021. "The Fed, housing and household debt over time," Department of Economics University of Siena 850, Department of Economics, University of Siena.
    5. McCartney, W. Ben & Shah, Avni M., 2022. "Household mortgage refinancing decisions are neighbor influenced, especially along racial lines," Journal of Urban Economics, Elsevier, vol. 128(C).
    6. Madeira, Carlos, 2021. "The potential impact of financial portability measures on mortgage refinancing: Evidence from Chile," Journal of International Money and Finance, Elsevier, vol. 117(C).
    7. Karen Pence, 2022. "Liquidity in the mortgage market: How does the COVID‐19 crisis compare with the global financial crisis?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(6), pages 1405-1424, November.
    8. Nadia Balemi & Roland Füss & Alois Weigand, 2021. "COVID-19’s impact on real estate markets: review and outlook," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(4), pages 495-513, December.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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