Mortgage Prepayment and Path-Dependent Effects of Monetary Policy +++ POSTPONED +++

When: 17 Mar 2020, 12:00-13:15
Where: HoF E.01/Deutsche Bank
Speaker: Konstantin Milbradt

How much ability does the Fed have to stimulate the economy by cutting interest rates?  We argue that the presence of substantial debt in fixed-rate, prepayable mortgages means that the ability to stimulate the economy by cutting interest rates depends not just on their current level but also on their previous path. Using a household model of mortgage prepayment matched to detailed loan-level evidence on the relationship between prepayment and rate incentives, we argue that recent interest rate paths will generate substantial headwinds for future monetary stimulus.


*** Please note that we have to postpone this seminar due to the currrent COVID-19 situation! We are very sorry and we will keep you updated. ***