MORE MORTGAGES, LOWER GROWTH?

Adjustable Rate Mortgages: Increasing Efficiency More Than Housing Activity

This publication primarily presents economic research aimed at improving policymaking by the Federal Reserve System and other governmental authorities. Articles may be reprinted if the source is credited and the Research Department is provided with copies of reprints. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the ...

A Treatise on Mortgages

Adjustable Rate Mortgages: Valuation

A simulation method is employed to value Adustable Rate Mortgages, (ARMS). It is used to price two typical instruments: an ARM linked to a Treasury interest rate and an ARM linked to a "Cost of Funds" Index. Contractual provisions such as the margin over the index, caps and floors on the ARM's rate or on the monthly prepayment, reset frequency, and the "teaser" rate are examined for their influ...

Mortgages and monetary policy

How is monetary policy transmitted through its impact on mortgage borrowings? How does this transmission mechanism depend on whether mortgages are fixed or floating rate? To address these questions, we add a model of financial institutions’ behaviour to a dynamic general equilibrium model in which some households face credit constraints. We use this model to analyse the real effects of inflatio...

More on Finance and Growth: More Finance, More Growth?

JULY/AUGUST 2003 31 Nobel Prize winners disagree about the impact of the financial sector on economic growth. Some do not even consider finance worth discussing. A collection of essays by the “pioneers of development economics”—including three winners of the Nobel Prize in Economics—does not discuss finance (Meier and Seers, 1984). At the other extreme, Nobel Prize winner Merton Miller (1998, p...