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Home Equity Lending and Retail Spending: Evidence from a Natural Experiment in Texas

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  • Chadi S. Abdallah
  • William D. Lastrapes

Abstract

We estimate how spending in Texas responded to a 1997 constitutional amendment that relaxed severe restrictions on home equity lending. We use this event as a natural experiment to estimate the importance of credit constraints. If households are credit-constrained, such an increase in credit availability will increase their spending. We find that Texas retail sales at the county and state levels increased significantly after the amendment, lending support to the credit-constraint hypothesis. We confirm these findings and refine our interpretation of the estimated aggregate-level responses using household-level data on home equity loans. (JEL D14, E21, G21, G28)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 4 (2012)
Issue (Month): 4 (October)
Pages: 94-125

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Handle: RePEc:aea:aejmac:v:4:y:2012:i:4:p:94-125

Note: DOI: 10.1257/mac.4.4.94
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Cited by:
  1. Wendy Nyakabawo & Stephen M. Miller & Mehmet Balcilar & Sonali Das & Rangan Gupta, 2013. "Temporal Causality between House Prices and Output in the U. S.: A Bootstrap Rolling-Window Approach," Working Papers 201329, University of Pretoria, Department of Economics.
  2. Luca Guerrieri & Matteo Iacoviello, 2012. "Collateral Constraints and Macroeconomic Asymmetries," 2012 Meeting Papers, Society for Economic Dynamics 1024, Society for Economic Dynamics.
  3. Risto Herrala & Rima Turk Ariss, 2013. "Credit Constraints, Political Instability, and Capital Accumulation," IMF Working Papers 13/246, International Monetary Fund.

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  1. Home Equity Lending and Retail Spending: Evidence from a Natural Experiment in Texas (AEJ:MA 2012) in ReplicationWiki

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