NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Kasper M. Nielsen

Hong Kong University
of Science and Technology
Clearwater Bay
Hong Kong

E-Mail: nielsen@ust.hk
Institutional Affiliation: Hong Kong University of Science and Technology

NBER Working Papers and Publications

July 2015Sources of Inaction in Household Finance: Evidence from the Danish Mortgage Market
with Steffen Andersen, John Y. Campbell, Tarun Ramadorai: w21386
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.
 
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