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Mortgage Contract Design: Implications for Households, Monetary Policy, and Financial Stability
May 21-22, 2015
Federal Reserve Bank of New York
A conference sponsored by the
Federal Reserve Bank of New York,
in association with the
NYU Stern School of Business Center for Real Estate Finance Research (CREFR)
and the Journal of Financial Economics (JFE)
Background and aims
The design of mortgage contracts varies strikingly across countries and through time, in terms of interest rate sensitivity, callability, maturity and other dimensions. For example, long-term prepayable fixed-rate mortgages predominate in the US and Denmark, while variable-rate contracts tied to short-term interest rates are popular in the UK, Canada, Australia and a number of other countries. These differences reflect a variety of factors ranging from household preferences to housing finance regulation.
Mortgage contract design has important implications for monetary policy transmission, financial stability, household finance and portfolio choice. For example, the link between monetary policy and mortgage interest rates paid by households is less direct in the US than in many other countries, since most borrowers have fixed-rate mortgages, for which the interest rate only adjusts if the borrower refinances or relocates and takes out a new loan.
The conference organizers invite the submission of papers or research proposals on the topic of mortgage contract design, to be presented at a conference in May 2015. The conference aims at bringing together financial economists, macroeconomists, practitioners and policy makers to stimulate debate and research on this important topic.
Topics of interest
Papers and proposals for both theoretical and empirical studies on the topic of mortgage contract design are encouraged, including but not limited to the following:
Causes of cross-country variation in the terms of mortgage contracts, such as differences in household preferences, financial and banking systems, or government institutions.
The interaction between mortgage contracts and the structure of the financial system, such as implications for nominal interest rates and their volatility, and effects on financial stability.
Implications for monetary policy transmission (e.g., the relative strength of different monetary policy transmission channels, interactions with the zero lower bound, distributional impacts of monetary policy, impact on optimal policy).
Other real economic implications, including potential externalities, of mortgage contract design (e.g. for default risk, consumption volatility, household mobility, etc.).
Financial innovation and alternative mortgage contract designs – for instance, how can mortgages be designed to facilitate efficient ex-post renegotiation (e.g. should the mortgage principal balance be linked to home prices in some way)? What factors may lead to inefficiently low or high financial innovation in mortgage markets?
The role of financial literacy and other behavioral factors for household decision-making in mortgage markets, and the implications of these factors for contract design.
A two-day conference is planned for Thursday May 21 and Friday May 22, 2015. The first day will focus on academic research. The second will focus on policy presentations and panel discussions.
The conference will provide accommodation as well as financial support for travel expenses to authors whose papers are accepted for the conference, and for discussants.
Both complete papers and research proposals will be considered. However, for accepted research proposals, inclusion on the conference program requires that a completed draft of the paper be provided to the organizers at least two months prior to the conference date.
The conference will pay for the first-round submission fees to the Journal of Financial Economics (JFE) for any paper accepted to the conference, as long as the paper is submitted within two months after the conference date. If a sufficient number of papers submitted to the JFE are accepted within a year of the conference, the papers will be grouped as a special issue. All papers accepted for the conference and submitted to the JFE will be subject to the JFE’s standard review process. Please note that authors are not required to submit their paper to the JFE, and that papers already submitted to the JFE or to other journals can also be submitted to the conference. Authors planning to submit their paper to the JFE if accepted for the conference should indicate so when they submit for conference consideration.
John Campbell, Harvard University
Stijn Van Nieuwerburgh, New York University
Andreas Fuster, Federal Reserve Bank of New York
David Lucca, Federal Reserve Bank of New York
James Vickery, Federal Reserve Bank of New York
Arvind Krishnamurthy, Northwestern University
Tomasz Piskorski, Columbia University
Tarun Ramadorai, Oxford University
David Scharfstein, Harvard University
Amit Seru, University of Chicago
Nancy Wallace, UC Berkeley