NATIONAL BUREAU OF ECONOMIC RESEARCH
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MoNK: Mortgages in a New-Keynesian Model

Carlos Garriga, Finn E. Kydland, Roman Šustek

NBER Working Paper No. 26427
Issued in November 2019
NBER Program(s):Economic Fluctuations and Growth Program, The Monetary Economics Program

We propose a tractable framework for monetary policy analysis in which both short- and long-term debt affect equilibrium outcomes. This objective is motivated by observations from two literatures suggesting that monetary policy contains a dimension affecting expected future interest rates and thus the costs of long-term financing. In New-Keynesian models, however, long-term loans are redundant assets. We use the model to address three questions: what are the effects of statement vs. action policy shocks; how important are standard New-Keynesian vs. cash flow effects in their transmission; and what is the interaction between these two effects?

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Document Object Identifier (DOI): 10.3386/w26427

 
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