Journal ArticleDOI
Household Balance Sheets, Consumption, and the Economic Slump*
Atif Mian,Kamalesh Rao,Amir Sufi +2 more
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In this article, the authors use the highly unequal geographic distribution of wealth losses across the United States to estimate a large elasticity of consumption with respect to housing net worth of 0.6 to 0.8, which soundly rejects the hypothesis of full consumption risk sharing.Abstract:
lapse using the highly unequal geographic distribution of wealth losses across the United States. We estimate a large elasticity of consumption with respect to housing net worth of 0.6 to 0.8, which soundly rejects the hypothesis of full consumption risk-sharing. The average marginal propensity to consume (MPC) out of housing wealth is 5–7 cents with substantial heterogeneity across ZIP codes. ZIP codes with poorer and more levered households have a significantly higher MPC out of housing wealth. In line with the MPC result, ZIP codes experiencing larger wealth losses, particularly those with poorer and more levered households, experience a larger reduction in credit limits, refinancing likelihood, and credit scores. Our findings highlight the role of debt and the geographic distribution of wealth shocks in explaining the large and unequal decline in consumption from 2006 to 2009. JEL Codes: E21, E32, E44, E60.read more
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Journal ArticleDOI
Housing, the Credit Market and Unconventional Monetary Policies: From the Sovereign Crisis to the Great Lockdown
TL;DR: In this paper, the authors developed a two-country model of a monetary union to evaluate the interaction between housing and unconventional monetary policies and found that asset purchasing performs better during a crisis, particularly if it is conducted for an appropriate extent of time.
Journal ArticleDOI
Credit cycles with market-based household leverage
TL;DR: This paper developed a general equilibrium model in which households' mortgage leverage is determined by supply and demand forces, where the price of credit impacts the quantity of leverage households choose, and showed that growth in demand for safe assets that replicates the falling interest rates in the 2000s causes an empirically realistic boom in household borrowing, debt-financed consumption, and house prices.
Journal ArticleDOI
Low Interest Rates and the Distribution of Household Debt
TL;DR: In this article, the authors study how changes in interest rates affect the borrowing of households and the distribution of debt within the population in a model of household borrowing with credit constraints and endogenous house prices, and show that less constrained households with more pre-existing housing wealth increase their borrowing most when interest rates fall.
Journal ArticleDOI
Capital Spillover, House Prices, and Consumer Spending: Quasi-Experimental Evidence from House Purchase Restrictions
TL;DR: This paper used a quasi-experiment to study the effects of out-of-town housing demand on house prices and consumer spending and found that while these restrictions were effective in containing the local house price surge, they induced capital flight, and sharp abnormal increases in house prices in nearby unregulated cities.
ReportDOI
House Prices and Consumption Inequality
TL;DR: In this paper, the authors characterize how house price shocks affect consumption inequality using a life-cycle model of housing and nonhousing consumption with incomplete markets and derive analytical expressions for the dynamics of inequalities and use these to analyze large house prices swings seen in the UK.
References
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Journal ArticleDOI
Optimum consumption and portfolio rules in a continuous-time model☆
TL;DR: In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.
Posted Content
Agency Costs, Net Worth, And Business Fluctuations
Ben S. Bernanke,Mark Gertler +1 more
TL;DR: The authors constructs a simple neoclassical model of intrinsic business cycle dynamics in which borrowers' balance sheet positions play an important role and shows that the agency costs of undertaking physical investments are inversely related to the entrepreneur's/borrower's net worth.
Posted ContentDOI
Agency Costs, Net Worth, and Business Fluctuations.
Mark Gertler,Ben S. Bernanke +1 more
TL;DR: The authors developed a simple neoclassical model of the business cycle in which the condition of borrowers' balance sheets is a source of output dynamics, and the mechanism is that higher borrower net worth reduces the agency costs of financing real capital investments.
Journal ArticleDOI
Home Bias at Home: Local Equity Preference in Domestic Portfolios
TL;DR: The authors showed that the strong bias in favor of domestic securities is a well-documented characteristic of international investment portfolios, yet the preference for investing close to home also applies to portfolios of domestic stocks.
Book ChapterDOI
Optimum Consumption and Portfolio Rules in a Continuous-Time Model*
TL;DR: In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.
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