State Dependent Effects of Monetary Policy: the Refinancing Channel
This paper studies how the impact of monetary policy depends on the dis- tribution of savings from refinancing mortgages. We show that the e cacy 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. Motivated by the rapid expansion of Fintech, we study the impact of a fall in refinancing costs on the e cacy of monetary policy. Our model implies that as refinancing costs decline, the e↵ects of monetary policy become less state dependent and more powerful.
Sergio Rebelo, Martin S. Eichenbaum, Arlene Wong
Rebelo, Sergio, Martin S. Eichenbaum, and Arlene Wong. 2018. State Dependent Effects of Monetary Policy: the Refinancing Channel.