IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v110y2020i10p3184-3230.html

Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market

Author

Listed:
  • Steffen Andersen
  • John Y. Campbell
  • Kasper Meisner Nielsen
  • Tarun Ramadorai

Abstract

We build an empirical model to attribute delays in mortgage refinancing to psychological costs inhibiting refinancing until incentives are sufficiently strong; and behavior, potentially attributable to information-gathering costs, lowering the probability of household refinancing per unit time at any incentive. We estimate the model on administrative panel data from Denmark, where mortgage refinancing without cash-out is unconstrained. Middle-aged and wealthy households act as if they have high psychological refinancing costs; but older, poorer, and less-educated households refinance with lower probability irrespective of incentives, thereby achieving lower savings. We use the model to understand frictions in the mortgage channel of monetary policy transmission.

Suggested Citation

  • Steffen Andersen & John Y. Campbell & Kasper Meisner Nielsen & Tarun Ramadorai, 2020. "Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market," American Economic Review, American Economic Association, vol. 110(10), pages 3184-3230, October.
    • Handle: RePEc:aea:aecrev:v:110:y:2020:i:10:p:3184-3230
    DOI: 10.1257/aer.20180865
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20180865
    Download Restriction: no
    File URL: https://doi.org/10.3886/E118762V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20180865.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/aer.20180865.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/aer.20180865?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:110:y:2020:i:10:p:3184-3230. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.