Fairly generous assumptions about the propensity of households to devote equity cash-outs to new spending suggest that refinancings may have boosted annualized real consumption growth between ¼ and ½ percentage point in the second half of 2002, the period of maximum impact.
The result is dangerous portfolio mismatches – long-term projects are financed with short-term debt and/or domestic projects are financed with foreign currency loans. In either case, the government and private citizens are subjected to the risks of unexpected changes in short-term interest rates and/or to the risks of a change in exchange rates.