25 Years IWH

Veranstaltung
23
Apr 2018

14:15 - 15:45

Multi-period Loans, Non-linearities and Monetary Policy: A Quantitative Evaluation

We study the implications of multi-period mortgage loans for monetary policy, considering several realistic modifications – fixed interest rate contracts, lower bound constraint on newly granted loans, and possibility for the collateral constraint to become slack – to an otherwise standard DSGE model with housing and financial intermediaries.

Speaker
Kristina Bluwstein , Bank of England
Location
IWH, conference room
Kristina Bluwstein

Über den Autor

Kristina Bluwstein

research interest: applied macroeconometrics with a strong interest in macro-financial linkages, international spillovers, and (unconventional) monetary and macroprudential policy

We study the implications of multi-period mortgage loans for monetary policy, considering several realistic modifications – fixed interest rate contracts, lower bound constraint on newly granted loans, and possibility for the collateral constraint to become slack – to an otherwise standard DSGE model with housing and financial intermediaries. We estimate the model in its nonlinear form and argue that all these features are important to understand the evolution of mortgage debt during the recent US housing market boom and bust. We show how the non-linearities associated with the two constraints make the transmission of monetary policy dependent on the housing cycle, with weaker effects observed when house prices are high or start falling sharply. We also find that higher average loan duration makes monetary policy less effective, and may lead to asymmetric responses to positive and negative monetary shocks.

Ansprechpartner

Felix Pohle
Felix Pohle
Economist

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