IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v115y2025i11p3909-40.html
   My bibliography  Save this article

Borrowing and Spending in the Money: Debt Substitution and the Cash-Out Refinance Channel of Monetary Policy

Author

Listed:
  • Elliot Anenberg
  • Tess Scharlemann
  • Eileen van Straelen

Abstract

We show that the strong negative effect of higher mortgage rates on cash-out refinancing reflects substitution into other borrowing products, not large changes in total new household borrowing. We exploit plausibly exogenous changes in interest rates due to unconventional monetary policy surprises to show that changes in cash-out and other borrowing are roughly offsetting. The elasticity of new household borrowing with respect to mortgage rates is low and varies little with the borrower's outstanding mortgage rate. Our results suggest that the cash-out refinance channel of unconventional monetary policy is weak and not path dependent.

Suggested Citation

  • Elliot Anenberg & Tess Scharlemann & Eileen van Straelen, 2025. "Borrowing and Spending in the Money: Debt Substitution and the Cash-Out Refinance Channel of Monetary Policy," American Economic Review, American Economic Association, vol. 115(11), pages 3909-3940, November.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:11:p:3909-40
    DOI: 10.1257/aer.20231264
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20231264
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://doi.org/10.3886/E229322V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/materials/24128
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/materials/24129
    Download Restriction: no
    File URL: https://libkey.io/10.1257/aer.20231264?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
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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

    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:115:y:2025:i:11:p:3909-40. 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.