Download or read book Essays on Housing Collateral and Macroeconomics written by Taejun Lim and published by . This book was released on 2015 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This thesis examines the role of housing as collateral and occupational choices in aggregate economies. Chapter 1 studies the impact of house price fuctuations on small businesses. The unprecedented upheavals in the U.S. housing market since 2000 and corresponding oscillations in home equity values profoundly affected the net worth and borrowing capacities of individual households. I develop a quantitative model where changes in house prices influence households' borrowing capacities, which in turn influence the entry-exit and expansion-contraction decisions of small business owners. I show that the housing collateral effect can explain the empirically observed strong correlation between house prices and small business activities (as measured by the number of businesses and the number of employees in the small business sector). Next, I conduct an experiment to measure how much of the shrinkage in small business activities during the recent recession can be explained by the housing collateral effect. I argue that the decrease in the value of housing as collateral, following the housing market crash in 2007, can account for 53 percent of the decrease in the number of small businesses and 98 percent of the decrease in the level of small business employment. In Chapter 2, I present an occupational choice model which emphasizes the use of housing as collateral and apply the model to examine the magnitude of the effect of a housing boom on economic growth in countries at different stages of financial development. The model results are twofold. First, a housing boom mitigates capital misallocation which results from an incomplete financial system, by expanding a business owner's borrowing capacity through an increase in collateral value, and thus boosts economy. Second, the impact of a housing boom is greater in countries with less developed financial systems. I provide empirical evidence to support the model results. To get around an endogeneity issue regarding housing booms (whether hous- ing booms boost economy through increases in collateral value or some other third factor boosts economy and thereby increases house prices), I focus on an essential difference between financial institutions (banks) and financial markets (stock mar- kets): only the former requires the provision of collateral in credit transactions. I use two sets of indicators - one for financial institutions and the other for financial markets - to proxy the level of financial development. The analysis of 23 housing boom episodes in 55 countries from 1997 to 2012 reveals that economic growth and financial development are inversely related when the level of financial development is measured by financial institutions, but unrelated when the level of financial development is measured by financial markets. The collateral impact of a housing boom also turns out to be greater in countries whose economies rely more on small firms. Both these empirical findings are in favor of the model results."--Pages v-vi.

Download or read book Essays in Macroeconomics and Finance written by Amir Reza Mohsenzadeh Kermani and published by . This book was released on 2013 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter proposes a model of booms and busts in housing and non-housing consumption driven by the interplay between relatively low interest rates and an expansion of credit, triggered by further decline in interest rates and relaxing collateral requirements. When credit becomes available, households would like to borrow in order to frontload consumption, and this increases demand for housing and non-housing consumption. If the increase in the demand for housing translates into an increase in prices, then credit is fueled further, this time endogenously, because of the role of housing as collateral. Because a lifetime budget constraint still applies, even in the absence of a financial crisis, the initial expansion in housing and non-housing consumption will be followed by a period of contraction, with declining consumption and house prices. My mechanism clarifies that boom-bust dynamics will be accentuated in regions with inelastic supply of housing and muted in elastic regions. In line with qualitative predictions of my model, I provide evidence that differences in regions' elasticity of housing and initial relaxation of collateral constraints can explain most of the 2000-2006 boom and the subsequent bust in house prices and consumption across US counties. The second chapter (co-authored with Daron Acemoglu, Simon Johnson, James Kwak and Todd Mitton) studies the value of political connections during turbulent times and shows the announcement of Tim Geithner as President-elect Obamas nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a personal connection. This return was around 15 percent from day 0 through day 10, relative to other comparable financial firms. This result holds across a range of robustness checks and regardless of whether we measure connections in terms of meetings he had in 2007-08, non-profit board memberships he shared with financial services executives, or firms with headquarters in New York City. There were subsequently abnormal negative returns for connected firms when news broke that Geithners conrmation might be derailed by tax issues. We argue that this value of connections reflects the perceived impact of relying on the advice of a small network of financial sector executives during a time of acute crisis and heightened policy discretion. The third chapter (co-authored with Adam Ashcraft and Kunal Gooriah) studies the impact of skin-in-the game on the performance of securitized assets using evidence from conduit commercial mortgage backed securities (CMBS) market. A unique feature of this market is that an informed investor purchases the bottom 5 percent of the capital structure, known as the B-piece, conducting independent screening of loans from which all other investors benefit. However, during the recent credit boom, a secondary market for B-pieces developed, permitting these investors to significantly reduce their skin in the game. In this paper, we document, that after controlling for all information available at issue, the percentage of the B-piece that is sold by these investors has a significant adverse impact on the probability that more senior tranches ultimately default. The result is robust to the use of an instrumental variables strategy which relies on the greater ability of larger B-piece buyers to to sell these positions given the need for large pools of collateral. Moreover we show the risk associated with this agency problem was not priced.

Download or read book Essays in Macroeconomics and Finance written by Johannes Christopher Stroebel and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation I examine a number of financial and macroeconomic aspects of U.S. housing and mortgage markets. In the first chapter I analyze the importance of asymmetric information between mortgage lenders in explaining mortgage lending outcomes. I show that mortgage lenders that are owned by large property developers have superior information about the relative construction quality of ex-ante observationally similar homes within the same development, and that they exploit this information in the competition with other, less-informed mortgage lenders. As a result the collateral portfolio of those integrated lenders is of above-average quality. To compensate for the winner's curse in the presence of an integrated lender, less-informed lenders charge higher interest rates in developments with an integrated lender. In the second chapter I analyze government interventions in the housing market on prices, quantities and aggregate and distributional welfare using an overlapping-generations heterogeneous-agent general-equilibrium model calibrated to the U.S. economy. I consider (i) the introduction of temporary home purchase tax credits and (ii) a removal of the asymmetric tax treatment of owner-occupied and rental housing. Home buyer tax credits temporarily raise house prices and transaction volumes, but have negative welfare effects. Removing the asymmetric tax treatment of owner-occupied and rental housing generates welfare gains for a majority of agents in a comparison of stationary equilibria. Welfare impacts are more varied, though still positive, along the transition between steady states. In the third chapter I analyze the Federal Reserve's mortgage-backed securities (MBS) purchase program, the largest credit easing program established by the Fed during the financial crisis. I examine the quantitative impact of this program on mortgage interest rate spreads. This is more difficult than frequently perceived because of simultaneous changes in prepayment risk and default risk. The empirical results attribute a sizeable portion of the decline in mortgage rates to such risks and a relatively small and uncertain portion to the program.

Download or read book Essays on the Macroeconomics of Housing Markets written by Boaz Abramson and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the macroeconomic implications of government policies and house- hold decisions for housing market outcomes. The first chapter, "The Welfare Effects of Eviction and Homelessness Policies", studies the effects of various rental market policies that address evictions and homelessness. I find that "Right-to-Counsel" drives up rents so much that homelessness increases, and welfare is dampened. While lawyers make it harder to evict delinquent tenants, they are unable to prevent evictions because defaults on rent are driven by persistent shocks to income that cannot easily be smoothed across time. In contrast, rental assistance lowers tenants default risk and as a result reduces both homelessness and evictions and increases welfare. the second chapter, "Self-Assessed Financial Literacy in Housing Markets", studies the role of financial knowledge in home- ownership decisions. I show that households who self-assess them- selves to be more financially literate are more likely to own a house and take a more levered position on their house. I find that this is because households with higher levels of self-assessed financial knowledge have access to more accommodating mortgage terms and better risk-return tradeoffs in the housing market.

Download or read book Housing Markets in Europe written by Olivier de Bandt and published by Springer Science & Business Media. This book was released on 2010-10-14 with total page 416 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the recession in the years 2008-2009, the most severe for mature economies in the post-war period, housing markets were often mentioned as having a special responsibility. The objective of this book is to shed light on the cyclical behaviour of the housing markets, its fundamental determinants in terms of supply and demand characteristics, and its relationship with the overall business cycle. The co-movements of house prices across countries are also considered, as well as the channel of transmission of house price changes to the rest of the economy. Particular attention is paid to the effects on private consumption, through possible wealth effects. The book is a compilation of original papers produced by economists and researchers from the four main national central banks in the euro area, also with the participation of leading academics.

Download or read book Essays on Macroeconomics and Monetary Economics written by Fatih Tuluk and published by . This book was released on 2016 with total page 138 pages. Available in PDF, EPUB and Kindle. Book excerpt: My essays that are captured in two chapters of my dissertation focus on shadow banking system, collateralized debt arrangement and monetary policy. The first chapter studies the role of shadow banking in the recent financial crisis, the relationship between shadow banking and traditional banking, and it investigates the monetary policy reaction to overcome the financial frictions associated with the scarcity of collateral or shortages of safe assets that naturally led to the liquidity constraints. On the other hand, the second chapter studies the role of housing as a collateral or as a medium of exchange and it explores how the private liquidity, in the context of home-equity loans, and public liquidity work together to overcome the limited commitment frictions. In the first chapter, a Lagos-Wright model with costly-state verification and delegated monitoring financial intermediation, and a risk-sharing framework of banking is constructed. Lack of memory and limited commitment imply collateralized credit arrangements. In contrast to the traditional banking system, shadow banking system is not subject to the capital requirements. The relative use of shadow funded credit versus traditional bank loans entails the advantages of working outside the oversight of the bank regulations, but drawbacks of having information and transactions cost in funding entrepreneurs. I have five main findings: First, an entrepreneurial credit can help address the need for collateral. Second, the shadow funded credit shifts from risky to safer borrowers and loan creation capacity of the shadow banking sector shrinks when the economic outlook gets worse. Third, the traditional bank can fulfill the role of providing credit that shadow banks had played before the crisis, but can do it only to a certain extent. Fourth, to the extent that collateral backed by entrepreneurial credit mitigates the limited commitment friction in the traditional banking sector, the optimal monetary policy shifts nominal interest rate towards zero lower bound. Lastly, the quantitative easing program can be welfare increasing by reinforcing the shadow funded credit versus traditional banking lending if the credit frictions in the shadow banking sector are sufficiently small. The second chapter studies the role of home-equity loan and government debt in an environment with financial frictions. I construct a Lagos-Wright model in which private transactions must be secured under limited commitment and lack of record-keeping. Housing can be useful to support credit since it serves as collateral. It also gives direct utility as shelter and serves as a medium of exchange when the economy is inefficient. I show that when there is no efficiency loss due to exchange of housing, posting collateral is not optimal since collateralizable wealth is limited. In the state of efficiency loss, the collateral might be useful and the asset therefore bears a liquidity premium. However, once collateral becomes scarce - as it did during the financial crisis- then it amplifies the frictions and the buyer trades the asset to make up for the weak incentives associated with collateral. I show that the world is always non-Ricardian and therefore government debt implies higher welfare. As well, government debt enhances the private debt to the extent that posting collateral is always optimal. In equilibrium, full pledgeability of private collateral, in addition to government debt, completely rules out the efficiency loss arising from exchange of asset. Money and private banks are introduced. I show that as inflation imposes a tax on consumption, interest rate on cash loans imposes a tax on housing collateral. Finally, an increase in inflation raises the housing price near Friedman Rule.

Download or read book Housing Bubbles written by Sergi Basco and published by Springer. This book was released on 2018-10-01 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: “This book provides an accessible, yet formal framework to understand how housing bubbles arise, their international dimension, their consequences, and ways to prevent them.” Òscar Jordà, University of California, Davis, USA “Basco’s analysis blends, in a very rigorous but enjoyable manner , state-of-the-art theory and historical examples, adding also a very timely and valuable set of policy orientations.” Óscar Arce, Director General, Banco de España, Madrid, Spain Booms and busts of house prices are a recurrent feature throughout history. This book provides a comprehensive overview of the origins and economic consequences of these housing bubbles. The book starts with a formal definition of asset price bubbles and a summary of the most famous episodes, before describing how economists have thought about asset price bubbles; specifically behavioral vs. rational interpretations. These theories are applied to the special case of housing and the same framework is used to explain the implications of financial globalization for capital flows and housing bubbles. After analyzing its origins, the economic consequences of housing bubbles for both households and firms are derived and documented. The final sections are devoted to discussing the effects of financial crises and explain how financial regulation could mitigate the emergence of future housing bubbles. Case studies of the recent housing bubbles in the United States and Spain are also featured in the book. This book will be of value to advanced undergraduate macroeconomic courses, as well as researchers in international economics and macroeconomics and policy makers.

Download or read book Essays in Macroeconomics and Financial Economics written by Edison Guozhu Yu and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays. The first essay, entitled "Dynamic Market Participation and Endogenous Information Aggregation", studies information aggregation in financial markets with recurrent investor exit and entry. The paper considers a dynamic general equilibrium model of asset trading with private information and collateral constraints. Investors differ in their aversion to Knightian uncertainty: when uncertainty is high, some investors exit the market. Since exiting investors' information is not fully revealed by prices, conditional return volatility and risk premia both increase. I use data on institutional investors' holdings of individual stocks to show that investor exit rates indeed comove with return volatility and help forecast it. The model also implies that exit is more likely when wealth is more concentrated in the hands of less uncertainty averse investors. The model thus predicts more exit toward the end of a long boom, as seen in the data. Moreover, economies with looser collateral constraints should see more volatility due to exit and partial revelation. The second essay, entitled "The (Un)importance of Mobility in the Great Recession", is based on a paper co-authored with Siddharth Kothari and Itay Saporta-Eksten. Unemployment during and after the Great Recession has been persistently high. One concern is that the housing bust reduced mobility and prevented workers from moving for jobs. The paper characterizes flows out of unemployment that are related to mobility to construct an upper bound on the effect of mobility on unemployment between 2007 and 2012. The effect of mobility is always small: Using pre-recession mobility rates, decreased mobility can account for only an 11 basis points increase in the unemployment rate over the period. Using dynamics of renter mobility in this period to calculate homeowner counterfactual mobility, can account for an 8 basis points increase. Using the highest mobility rate observed in the data, reduced mobility accounts for only a 34 basis points increase in the unemployment rate. The third essay, entitled "Long-term Bonds in a Housing Model", looks into a housing model where mortgages are modeled as a long-term bond. Most house purchases in the US are financed through a mortgage with maturity between 15 and 30 years. This essay studies house price dynamics when modeling mortgages as long-term bonds instead of the more standard one-period bond. With this new feature in the model, results show that the equilibrium price-rent ratio and mortgages borrowing are much less sensitive to changes in the interest rates. In addition, the model can generate negative equity, which matches the presence of negative equity in the housing market downturn in data.

Download or read book Essays on Housing and Macroeconomics written by Guozhong Zhu and published by . This book was released on 2009 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies households' housing decision in the presence of income risks, and its implication on within-cohort income/consumption inequality and the nature of income risks facing households. It is composed of three chapters. The first chapter presents evidence from Panel Study of Income Dynamics (PSID) and Consumer Expenditure Survey (PSID) that housing consumption and housing investment are negatively affected by income risks. Within a household portfolio choice model, the negative effect can be attributed to the illiquidity of housing investment and the positive correlation between house price and income. The second chapter provides empirical evidence that the secular rise of income and consumption inequalities in the United States is age-dependent. It is more significant among younger households. With this feature, biasedness arises from the traditional methodology of decomposing inequality into age effect, year effect and cohort effect. A simple but effective remedy for the problem is proposed. The third chapter of the dissertation studies the age-profile of within-cohort income/consumption inequality, using the methodology proposed in the second chapter. It documents the age-profile of housing consumption inequality which is almost flat. This stands in contrast to the well-documented fact that within-cohort nonhousing consumption inequality rises with age, which has been argued to be evidence for persistent, uninsurable income shocks to households. This argument is challenged by the finding that housing consumption inequality has a flat age-profile. Within the framework of standard lifecycle model, the coexistence of rising nonhousing consumption inequality and flat housing consumption inequality constitutes a puzzle. A potential resolution lies in the negative effect of income uncertainty on housing decision which diminishes with age, as shown in the first chapter of the dissertation.

Download or read book Essays in Public Economics and Financial Macroeconomics written by Rafael Barbosa and published by . This book was released on 2021 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter of the thesis is entitled A Brief History of Land Value Taxation in Economic Theory. The issue of land rents and their taxation through a land value tax (LVT) was as a hotly debated topic in economic theory since classical age and until the early twentieth century, when it mostly vanished as a research subject. I provide a brief history of the evolution of the concept of land value taxation in economic theory in order to understand the reasons why it fell out of favor as a research subject in the literature. I identify this outcome as being a consequence of developments both inside and outside academia. The second chapter is entitled Tax Housing or Land? Distributional Effects of Property Taxation in Germany. Despite its theoretical merits, Land Value Taxation is not a common policy instrument. One of the main reasons is uncertainty regarding its distributional impacts. Using a general equilibrium model with heterogeneous agents calibrated to an unique household level dataset of German homeowners in 2017, we assess the distributional effects of replacing a housing tax with a LVT. Our data shows the share of land value in property value is 33%, on average, with considerable household heterogeneity, both within and across regions, and within income levels. We add to the empirical literature by showing land values are more concentrated than property values, but, within regions, not as strongly correlated with income, making it less progressive than a standard property tax for homeowners. Our model is the first to allow for an efficiency-equity trade-off from the introduction of a revenue neutral LVT. Results from the model show the introduction of a LVT increases residential investment substantially, reducing housing rents and benefiting renters. It also leads to migration from urban regions, promoting regional convergence. Landowners with high land holdings lose, in general, but most other landowners across income levels benefit, especially in non-urban regions. Overall, introduction of a LVT increases welfare, despite a minor regressive tendency in urban regions for homeowners. The third chapter is entitled Credit Spirals: Spillovers between Firm and Household Borrowing in a Small Open Economy. The paper deals with an open economy model of financial crisis with sudden stops, but featuring both household and firm borrowing. So far, the literature has mostly ignored the effects of joint borrowing for financial stability. The model features occasionally binding borrowing constraints and shows how borrowing decisions in one sector can reinforce standard capital flows and increase the volatility of collateral asset through strategic complementarities, beyond what standard financial accelerator models would predict. These spillovers can lead to sharper reductions in borrowing and consumption during sudden stop events.

Download or read book Essays in Housing and Macroeconomy written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Compared to the previous twenty years, residential investments in the US appear more stable after the mid-1980s. Chapter 2 explores key hypotheses regarding the underlying causes. In particular, it uses estimated DSGE models to examine whether a more responsive interest rate policy stabilizes the housing market by keeping inflation in check. These estimations indeed found a policy that has become more responsive over time. Counter-factual analysis confirms that the change stabilizes inflation as well as nominal interest rate. It does not, however, find the change in policy to have stabilizing effect on real economic activity including housing investment. It finds that smaller TFP shocks make modest contributions, while the biggest contributing factor to the fall in the housing volatility is a reduction in the sensitivity of the investment to demand variations. Chapter 3 constructs a richly specified model for the housing market to examine the empirical relevance of various costs and frictions, including the investment adjustment cost, sticky construction costs, search frictions, and sluggish adjustment of house prices. Using the US national-level quarterly data from 1985 and 2007, we find that the gradual adjustment of house prices is the most important and irreplaceable feature of the model. The key to developing an optimization-based empirical housing model, therefore, is to provide a structural interpretation for the slow adjustment in house prices. Chapter 4 uses US national-level time series of residential investment, price index of new houses, consumption and interest rate to explore whether the US, as a nation, experienced a drop in the price elasticity of supply of new housing. Maximum likelihood estimations with a simple stock-and-flow model found a statistically significant drop of the elasticity from 10 to 2.2, when the quarterly data between 1971 and 2007 are split at 1985. A richer model with mechanisms of gradual adjustment also indicates such a reduct.

Download or read book Essays in Macroeconomics and Financial Frictions written by Christine N. Tewfik and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation is comprised of three papers on the causes and consequences of the U.S. Great Recession. The emphasis is on the role that financial frictions play in magnifying financial shocks, as well as in informing the effectiveness of potential policies. Chapter 1, "Financial Frictions, Investment Delay and Asset Market Interventions," co-authored with Shouyong Shi, studies the role of investment delay in propagating different types of financial shocks, and how this role impacts the effectiveness of asset market interventions. The topic is motivated by the observation that, during the Great Recession, governments conducted large-scale asset market interventions. The aim was to increase the level of liquidity in the asset market and make it easier for firms to obtain financing. However, firms were observed to have delayed investment by hoarding liquid funds, part of which were obtained through the interventions. We construct a dynamic macro model to incorporate financial frictions and investment delay. Investment is undertaken by entrepreneurs who face liquidity frictions in the equity market and a collateral constraint in the debt market. After calibrating the model to the U.S. data, we quantitatively examine how aggregate activity is affected by two types of financial shocks: (i) a shock to equity liquidity, and (ii) a shock to entrepreneurs' borrowing capacity. We then analyze the effectiveness of government interventions in the asset market after such financial shocks. In particular, we compare the effects of government purchases of private equity and of private debt in the open market. In addition, we examine how these effects of government interventions depend on the option to delay investment. In Chapter 2, "Housing Liquidity and Unemployment: The Role of Firm Financial Frictions," I build upon the role that firms' ability to obtain funding plays in the severity of the Great Recession. I focus specifically on how the housing crisis reduced the ability of firms to obtain funding, and the consequences for unemployment. An important feature I focus on is the role of housing liquidity, or how easy it is to sell or buy a house. I analyze how an initial fall in housing market liquidity, linked to rising foreclosure costs for banks, affects labor market outcomes, which can have further feedback effects. I focus on the role that firm financial frictions play in these feedback effects. To this end, I construct a dynamic macro model that incorporates frictional housing and labor markets, as well as firm financial frictions. Mortgages are obtained from banks that incur foreclosure costs in the event of default. Foreclosure costs also affect the ease with which firms can borrow, and this influences their hiring decisions. I calibrate the model to U.S. data, and find that a rise in foreclosure costs that generates a 10% fall in the firm loan-to-output ratio results in a 3 percentage point rise in the unemployment rate. The rise in unemployment makes it more difficult for indebted owners to avoid defaulting on their mortgage. This rise in default, on the order of 20 percent, creates further slack in the housing market by both increasing the number of houses on the market and reducing the amount of buyers. Consequently, there are large drops in housing prices and in the size of mortgage loans. Notably, when firm financial frictions are absent, I observe a counter-factual fall in the unemployment rate, which mitigates the effects on the housing market, and even results in a fall in the mortgage default rate. The results highlight the importance of the impact of the housing market crisis on a firm's willingness to hire, and how firms' limited access to credit magnifies the initial housing shock. In Chapter 3, "Housing Market Distress and Unemployment: A Dynamic Analysis," I add to the contributions of my second paper, and extend the analysis to determine the dynamic effects of the housing crisis on unemployment. In Chapter 2, I focused on comparing stationary equilibria when there is a rise in the foreclosure costs associated with mortgage default. However, a full analysis must also take into account the dynamic effects of the shock. In order to do the dynamic analysis, I modify the model in my job market paper to satisfy the conditions of block recursivity. I do this by incorporating Hedlund's (2016) technique of introducing real estate agents in the housing market that match separately with buyers and sellers. Doing this makes the model's endogenous variables independent of the distribution of households and firms. Rather, the impact of the distribution is summarized by the shadow value of housing. This greatly improves the tractability of the model, and allows me to compute the dynamic response to a fall in a bank's ability to sell a foreclosed house, thus raising the costs of mortgage default. I find that the results are largely dependent on the size and persistence of the shock, as well as the level of firm financial frictions that are present. When firm financial frictions are high, as represented by the presence of an interest rate premium charged to firms, and the initial shock is large, the shock is transferred to firms via an endogenous rise in the cost of renting capital. Firms scale back on production and reduce employment. The rise in unemployment increases the debt burden for households with large mortgages. They can try and sell, but find it difficult to do so because they must sell at a high price to be able to pay off their debt. If they fail, they are forced to default, thus further raising the mortgage costs of banks, further reducing resources to firms, and propagating the initial shock. However, the extent of the propagation is limited; once the shock wears off, the economy recovers to its pre-crisis levels within two quarters. I discuss the reasons why, and what elements would be needed for greater persistence.

Download or read book Housing Finance and Real Estate Booms written by Mr.Eugenio Cerutti and published by International Monetary Fund. This book was released on 2015-06-03 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent global crisis highlighted the risks stemming from real estate booms. This has generated a growing literature trying to better understand the sources and the risks associated with housing and credit booms. This paper complements and supplements the previous work by (i) exploiting more disaggregated data on credit allowing us to dissociate between firm-credit and household (and in some cases mortgage) credit, and (ii) by taking into account the characteristics of the mortgage market, including institutional as well as other factors that vary across countries. This detailed cross-country analysis offers new valuable insights.

Download or read book Housing and the Financial Crisis written by Edward L. Glaeser and published by University of Chicago Press. This book was released on 2013-08-19 with total page 443 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional wisdom held that housing prices couldn’t fall. But the spectacular boom and bust of the housing market during the first decade of the twenty-first century and millions of foreclosed homeowners have made it clear that housing is no different from any other asset in its ability to climb and crash. Housing and the Financial Crisis looks at what happened to prices and construction both during and after the housing boom in different parts of the American housing market, accounting for why certain areas experienced less volatility than others. It then examines the causes of the boom and bust, including the availability of credit, the perceived risk reduction due to the securitization of mortgages, and the increase in lending from foreign sources. Finally, it examines a range of policies that might address some of the sources of recent instability.

Download or read book Essays on the Macroeconomics of Housing Markets written by Fabian Greimel and published by . This book was released on 2020* with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Wealth Inequality and Macroeconomics written by Rodolfo Erasmo Oviedo Moguel and published by . This book was released on 2018 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: The role of credit on wealth inequality in the USA: 1980 - 2012. In the USA, the share of total household wealth held by the richest 1% increased from 23.5 % in 1980 to 41.8% in 2012. A sharp reduction in the saving rate of the bottom 90% accounts for approximately 40% of this change. I construct a quantitative model that, under a reasonable calibration, is able to replicate this fact. I then use the model to decompose the total variation among some of the most likely candidates: (i) changes in credit conditions, (ii) increase in the concentration and riskiness of labor income and, (iii) reforms to the tax code. This decomposition exercise shows that, in the context of my model, the relaxation of the borrowing constraint explains approximately 45% of the increase in the share of wealth going to the top 1%. I also show that, in the absence of the credit constraint, the exogenous changes under (ii) and (iii) would have brought about a counterfactual increase in the aggregate saving rate. The effect of housing on the distribution of wealth in the USA. Wealth inequality increased dramatically in the previous 40 years. We construct a heterogeneous agent model with two types of assets: housing and productive capital and evaluate the effect of the observed increase in the price of housing on the saving behavior of different groups and hence on the wealth distribution. A percentage of the equity in housing can be posted as collateral to issue non-mortgage debt and the increase in the price of housing effectively relaxed the borrowing constraints and increased the permanent income of households. The result is an increase in Non-Mortgage debt for the households that were originally constrained in line with the findings of Mian and Sufi (2014).

Download or read book Essays on Housing and Macroeconomics written by Wonmun Shin and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Therefore, this chapter argues that higher house price volatility in emerging countries leads to their excess consumption volatility.