UC Davis

This dissertation studies how household heterogeneity in housing and mortgage markets shapes the transmission of monetary policy. Housing and mortgage markets are a central channel of monetary transmission: interest-rate changes alter mortgage payments when borrowers refinance and affect household wealth through house prices. How much a rate cut stimulates spending and where it moves house prices therefore depends on which households refinance, how they adjust spending, and which households are at the margin of homeownership. The three chapters trace this from the household side to its aggregate consequences for consumption and house prices. The first chapter documents that the take-up of monetary relief is unequal across the income distribution. Using loan-level mortgage data, I show that once refinancing becomes financially advantageous, lower-income households refinance at substantially lower rates and wait considerably longer to act than higher-income households. The gap leaves low-income households with a recurring cash-flow shortfall, and an identified monetary easing widens the refinancing response between high- and low-income borrowers well beyond the average response. The second chapter interprets these facts through a structural model of income-dependent refinancing frictions. Because the strength of the refinancing channel depends on the covariance between refinancing and the marginal propensity to consume, and the households that refinance most readily spend the least, the unequal distribution of frictions could weaken the aggregate consumption response to a rate cut beyond what average frictions imply. The model quantifies this attenuation and evaluates policies that redistribute refinancing opportunities. The third chapter, co-authored, turns from mortgage payments to house prices and from income to age. Across an OECD country panel and a U.S. county panel, we show that regions with a higher young-to-old population ratio are more likely to experience large housing booms, and that house prices respond more strongly to an identified credit easing where the population is younger. A life-cycle housing model rationalizes the pattern: younger economies hold more households at the owner-renter margin, so a common credit shock moves more of them into ownership. The results highlight the income and age dimensions of household heterogeneity, which closely shape how strongly monetary and credit shocks transmit to consumption and house prices.