State Dependent Effects Of Monetary Policy

Download or read book State Dependent Effects of Monetary Policy written by Martin S. Eichenbaum and published by . This book was released on 2018 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies how the impact of monetary policy depends on the distribution of savings from refinancing mortgages. We show that the efficacy of monetary policy is state dependent, varying in a systematic way with the pool of potential savings from refinancing. We construct a quantitative dynamic lifecycle 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 efficacy of monetary policy. Our model implies that as refinancing costs decline, the effects of monetary policy become less state dependent and more powerful.