Collateral constraints and macroeconomic asymmetries
AbstractA model with collateral constraints displays asymmetric responses to house price changes. When housing wealth is high, collateral constraints become slack, and the response of consumption and hours to shocks that move house prices is positive yet small. When housing wealth is low, collateral constraints become tight, and the response of consumption and hours to house price changes is negative and large. This finding is corroborated using evidence from national, state-level, and MSA-level data. Wealth effects computed in normal times may underestimate the response to large house price declines. Debt-relief policies may be far more effective during protracted housing slumps.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 1082.
Date of creation: 2013
Date of revision:
Other versions of this item:
- Luca Guerrieri & Matteo Iacoviello, 2012. "Collateral Constraints and Macroeconomic Asymmetries," 2012 Meeting Papers 1024, Society for Economic Dynamics.
- NEP-ALL-2013-08-16 (All new papers)
- NEP-DGE-2013-08-16 (Dynamic General Equilibrium)
- NEP-MAC-2013-08-16 (Macroeconomics)
- NEP-SPO-2013-08-16 (Sports & Economics)
- NEP-URE-2013-08-16 (Urban & Real Estate Economics)
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- Dominik Menno & Tommaso Oliviero, 2013. "Financial Intermediation, House Prices, and the Distributive Effects of the U.S. Great Recession," Economics Working Papers ECO2013/05, European University Institute.
- Beck, Thorsten & Colciago, Andrea & Pfajfar, Damjan, 2014.
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Journal of Economic Dynamics and Control,
Elsevier, vol. 43(C), pages 1-11.
- Thorsten Beck & Andrea Colciago & Damjan Pfajfar, 2014. "The role of financial intermediaries in monetary policy transmission," DNB Working Papers 420, Netherlands Central Bank, Research Department.
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