Work

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

Year: 2020

Type: article

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. (JEL E52, G21, G51, R31)

Source: American Economic Review

DOI: 10.1257/aer.20180865

Authors: Steffen Andersen, John Y. Campbell, Kasper Meisner Nielsen, Tarun Ramadorai

Institutions: Copenhagen Business School, National Bureau of Economic Research, Harvard University, Centre for Economic Policy Research, Imperial College London

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3090633140

FWCI: 24.72

Cites: 75

Cited by: 262

Related to: 10