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- Title
Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market.
- Authors
ANDERSEN, STEFFEN; CAMPBEL, JOHN Y.; NIELSEN, KASPER MEISNER; RAMADORAI, TARUN
- 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.
- Subjects
DENMARK; MORTGAGE refinancing; CONSUMER credit; CONSUMER behavior; MONETARY policy; MORTGAGES
- Publication
American Economic Review, 2020, Vol 110, Issue 10, p3184
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.20180865