Monk: Mortgages in a New-Keynesian Model
65 Pages Posted: 6 Nov 2019 Last revised: 18 Mar 2023
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Monk: Mortgages in a New-Keynesian Model
Monk: Mortgages in a New-Keynesian Model
Date Written: November 2019
Abstract
There has been much interest recently in the role of household long-term, mortgage, debt in the transmission of monetary policy. This paper offers a tractable framework that integrates the long-term debt channel with the standard New-Keynesian channel, providing a tool for monetary policy analysis that reflects the recent debates in the literature. As the model includes both short- and long-term debt, it provides a useful laboratory for the analysis of monetary policy operating not only through short-term actions, as has been done traditionally in the literature, but also through expected, persistent, changes in its stance.
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