Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market

65 Pages Posted: 27 Jul 2015 Last revised: 9 Jun 2021

See all articles by Steffen Andersen

Steffen Andersen

Copenhagen Business School - Department of Finance; CEPR

John Y. Campbell

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Kasper Meisner Nielsen

Copenhagen Business School - Department of Finance

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2015

Abstract

We build an empirical model to decompose delays in mortgage refinancing into time-dependent inaction (a low probability of responding to a refinancing incentive in a given quarter) and state- dependent inaction (a psychological addition to the financial cost of refinancing). We estimate the model on high-quality administrative panel data from Denmark, where mortgage refinancing without cash-out is unconstrained. Middle-aged and wealthy households exhibit state-dependent inaction; but older, poorer, and less-educated households exhibit strong time-dependent inaction and thereby achieve lower savings. We use the model to understand frictions in the mortgage channel of monetary policy transmission.

Suggested Citation

Andersen, Steffen and Campbell, John Y. and Nielsen, Kasper Meisner and Ramadorai, Tarun, Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market (July 2015). Available at SSRN: https://ssrn.com/abstract=2636106

Steffen Andersen (Contact Author)

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

CEPR ( email )

London
United Kingdom

John Y. Campbell

Harvard University - Department of Economics ( email )

Littauer Center
Room 213
Cambridge, MA 02138
United States
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617-495-7730 (Fax)

HOME PAGE: http://scholar.harvard.edu/campbell

National Bureau of Economic Research (NBER)

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Kasper Meisner Nielsen

Copenhagen Business School - Department of Finance ( email )

A4.17 Solbjerg Plads 3
Copenhagen, Frederiksberg 2000
Denmark

Tarun Ramadorai

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

HOME PAGE: http://www.tarunramadorai.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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