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Paper eres2008_239:
ARM OR FRM: WHICH MORTGAGE CONTRACT IS BETTER FOR CZECH HOUSEHOLDS?

id eres2008_239
authors Rybar, Ivan; Petr Zemcik
year 2008
title ARM OR FRM: WHICH MORTGAGE CONTRACT IS BETTER FOR CZECH HOUSEHOLDS?
source Book of Abstracts: 15th Annual European Real Estate Society Conference in Kraków, Poland
summary Household housing decisions are usually taken early in life and therefore have significant welfare consequences. There are two types of loans available for households: Fixed-rate mortgage (FRM) contracts and adjustable-rate mortgage (ARM) contracts. We investigate the welfare effects of fixed-rate and adjustable-rate mortgage contracts on Czech households by calibrating and solving a life-cycle model used for this purpose by Campbell and Cocco (2003). We compare the distribution of utility in simulations under FRM and ARM and find that FRM is preferred to ARM. This result is in conflict with findings that Campbell and Cocco (2003) report for U.S. households, probably due to higher inflation and real interest rate uncertainty in the Czech Republic.
series ERES:conference
email ivan.rybar@cba.ufl.edu
discussion No discussions. Post discussion ...
ratings
session I4
last changed 2008/11/26 14:05
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