The role of households' collateralized debts in macroeconomic stabilization
AbstractMarket innovations following the financial reforms of the early 1980's relaxed collateral constraints on households' borrowing. This paper examines the implications of this development for macroeconomic volatility. We combine collateral constraints on households with heterogeneity of thrift in a calibrated general equilibrium model, and we use this tool to characterize the business cycle implications of realistically lowering minimum down payments and rates of amortization for durable goods purchases. The model predicts that this relaxation of collateral constraints can explain a large fraction of the volatility decline in hours worked, output, household debt, and household durable goods purchases.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-04-24.
Date of creation: 2004
Date of revision:
Contact details of provider:
Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
Web page: http://www.chicagofed.org/
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-23 (All new papers)
- NEP-BEC-2005-05-23 (Business Economics)
- NEP-DGE-2005-05-23 (Dynamic General Equilibrium)
- NEP-MAC-2005-05-23 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Del Boca, Daniela & Lusardi, Annamaria, 2002.
"Credit Market Constraints and Labor Market Decisions,"
IZA Discussion Papers
598, Institute for the Study of Labor (IZA).
- Del Boca, Daniela & Lusardi, Annamaria, 2003. "Credit market constraints and labor market decisions," Labour Economics, Elsevier, vol. 10(6), pages 681-703, December.
- Gary D. Hansen & Edward C. Prescott, 2005. "Capacity constraints, asymmetries, and the business cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 850-865, October.
- Per Krusell & Anthony A. Smith & Jr., 1998.
"Income and Wealth Heterogeneity in the Macroeconomy,"
Journal of Political Economy,
University of Chicago Press, vol. 106(5), pages 867-896, October.
- Krusell, P & Smith Jr, A-A, 1995. "Income and Wealth Heterogeneity in the Macroeconomic," RCER Working Papers 399, University of Rochester - Center for Economic Research (RCER).
- Per Krusell & Anthony A. Smith, Jr., . "Income and Wealth Heterogeneity in the Macroeconomy," GSIA Working Papers 1997-37, Carnegie Mellon University, Tepper School of Business.
- Fortin, N.M., 1992.
"Allocation Inflexibilities , Female Labor Supply and Housing Assets Accumulation: Are Women Working to Pay the Mortagage,"
Cahiers de recherche
9204, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Fortin, Nicole M, 1995. "Allocation Inflexibilities, Female Labor Supply, and Housing Assets Accumulation: Are Women Working to Pay the Mortgage?," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 524-57, July.
- Fortin, N.M., 1992. "Allocation Inflexibilities , Female Labor Supply and Housing Assets Accumulation: Are Women Working to Pay the Mortagage," Cahiers de recherche 9204, Universite de Montreal, Departement de sciences economiques.
- Jeremy Greenwood & Ananth Seshadri & Mehmet Yorukoglu, 2002.
"Engines of Liberation,"
Economie d'Avant Garde Research Reports
2, Economie d'Avant Garde.
- Greenwood,J. & Seshadri,A. & Yorukoglu,M., 2002. "Engines of liberation," Working papers 1, Wisconsin Madison - Social Systems.
- Jeremy Greenwood & Ananth Seshadri & Mehmet Yorukoglu, 2003. "Engines of Liberation," RCER Working Papers 503, University of Rochester - Center for Economic Research (RCER).
- Gary Hansen, 2010.
"Indivisible Labor and the Business Cycle,"
Levine's Working Paper Archive
233, David K. Levine.
- Rupert, Peter & Rogerson, Richard & Wright, Randall, 2000. "Homework in labor economics: Household production and intertemporal substitution," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 557-579, December.
- Jonas D.M. Fisher, 2001. "A real explanation for heterogeneous investment dynamics," Working Paper Series WP-01-14, Federal Reserve Bank of Chicago.
- Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
- King, Robert G. & Rebelo, Sergio T., 1999.
"Resuscitating real business cycles,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007
- Robert G. King & Sergio T. Rebelo, 2000. "Resuscitating Real Business Cycles," RCER Working Papers 467, University of Rochester - Center for Economic Research (RCER).
- Robert G. King & Sergio T. Rebelo, 2000. "Resuscitating Real Business Cycles," NBER Working Papers 7534, National Bureau of Economic Research, Inc.
- King, Robert G & Plosser, Charles I & Rebelo, Sergio T, 2002.
"Production, Growth and Business Cycles: Technical Appendix,"
Society for Computational Economics, vol. 20(1-2), pages 87-116, October.
- James H. Stock & Mark W. Watson, 2003. "Has the business cycle changed?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 9-56.
- James H. Stock & Mark W. Watson, 2003.
"Has the Business Cycle Changed and Why?,"
in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230
National Bureau of Economic Research, Inc.
- Matteo Iacoviello, 2002.
"House prices, borrowing constraints and monetary policy in the business cycle,"
Boston College Working Papers in Economics
542, Boston College Department of Economics, revised 06 Dec 2004.
- Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
- James A. Kahn & Margaret M. McConnell & Gabriel Perez-Quiros, 2002. "On the causes of the increased stability of the U.S. economy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 183-202.
- Calza, Alessandro & Monacelli, Tommaso & Stracca, Livio, 2006.
"Mortgage markets, collateral constraints, and monetary policy: Do institutional factors matter?,"
CFS Working Paper Series
2007/10, Center for Financial Studies (CFS).
- Calza, Alessandro & Monacelli, Tommaso & Stracca, Livio, 2007. "Mortgage Markets, Collateral Constraints, and Monetary Policy: Do Institutional Factors Matter?," CEPR Discussion Papers 6231, C.E.P.R. Discussion Papers.
- Calza, Alessandro & Stracca, Livio & Monacelli, Tommaso, 2009.
"Housing finance and monetary policy,"
Working Paper Series
1069, European Central Bank.
- Frank Smets, 2007. "Housing is the business cycle: commentary," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 235-243.
- Martin Gervais & Jonas Fisher, 2008.
"First Time Home Buyers and Residential Investment Volatility,"
2008 Meeting Papers
148, Society for Economic Dynamics.
- Jonas D. M. Fisher & Martin Gervais, 2007. "First-time home buyers and residential investment volatility," Working Paper Series WP-07-15, Federal Reserve Bank of Chicago.
- Benoît Mojon, 2007. "Monetary policy, output composition and the Great Moderation," Working Paper Series WP-07-07, Federal Reserve Bank of Chicago.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores).
If references are entirely missing, you can add them using this form.