Sources of inaction in household finance: evidence from the Danish mortgage markets
File(s)
Accepted version
Author(s)
Andersen, Steffen
Campbell, John Y
Nielsen, Kasper Meisner
Ramadorai, Tarun
Type
Journal 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.
Date Issued
2020-10-01
Date Acceptance
2020-03-09
Citation
The American Economic Review, 2020, 110 (10), pp.3184-3230
ISSN
0002-8282
Publisher
American Economic Association
Start Page
3184
End Page
3230
Journal / Book Title
The American Economic Review
Volume
110
Issue
10
Copyright Statement
©2020 American Economic Association. All rights reserved.
Identifier
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000576053700006&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=1ba7043ffcc86c417c072aa74d649202
Subjects
Social Sciences
Economics
Business & Economics
OPTIMAL INATTENTION
CONSUMER CONFUSION
PORTFOLIO CHOICE
STOCK-MARKET
MENU COSTS
HETEROGENEITY
BORROWERS
INERTIA
RISK
CONSTRAINTS
Publication Status
Published