Home Equity, Mobility, and Macroeconomic Fluctuations
AbstractHow does a fall in house prices aÂ¤ect real activity? This paper presents a business cycle model in which a decline in house prices reduces geographical mobility, creating distortions in the labor market. This happens because homeowners face declines in their home equity levels, after which it becomes more diÂ¢ cult to provide the downpayment required for a new mortgage loan. Unemployed homeowners therefore turn down job offers that would require them to move. The model explains joint cyclical patterns in housing and labor market aggregates, as well as the puzzling breakdown of the U.S. Beveridge curve that occurred during 2009.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 117.
Date of creation: 2011
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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- Siddharth Kothari & Itay Saporta Eksten & Edison Yu, 2013.
"Online Appendix to "The (Un)importance of Geographical Mobility in the Great Recession","
12-205, Review of Economic Dynamics.
- Siddharth Kothari & Itay Saporta Eksten & Edison Yu, 2013. "The (Un)importance of Geographical Mobility in the Great Recession"," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 553-563, July.
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