Non-linear mortgage features can impact policymaking – BoE paper
Non-linear features of mortgages impact policymaking in a DSGE model, the authors find
Adding several features of mortgage debt into an economic model has important implications for policymaking, according to a staff working paper published recently by the Bank of England.
The authors focus on multi-period mortgage debt, occasionally binding collateral constraints and the existence of a “lower bound” for new loans – a borrower may be prevented from taking out a loan but cannot be forced to repay an old loan faster if the value of collateral falls. They integrate these features
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