Interest rates following financial re-regulation
This article uses a calibrated general-equilibrium model of lending from the wealthy to the middle class to evaluate the effects of tightening household lending standards. The authors simulate a rise in down payment and amortization rates from their average values in the late 1990s and early 2000s to levels more typical of the era before the financial deregulation of the early 1980s. Their results show a drop in loan demand. This substantially lowers interest rates for an extended period. Counterintuitively, tightening lending standards makes borrowers better off.
Volume (Year): (2010)
Issue (Month): Q I ()
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- Richard K. Green & Susan M. Wachter, 2005.
"The American Mortgage in Historical and International Context,"
Journal of Economic Perspectives,
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- Benjamin M. Friedman, 1992. "Learning From the Reagan Deficits," NBER Working Papers 4022, National Bureau of Economic Research, Inc.
- Robert A. Becker, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 375-382.
- Friedman, Benjamin M, 1992. "Learning from the Reagan Deficits," American Economic Review, American Economic Association, vol. 82(2), pages 299-304, May. Full references (including those not matched with items on IDEAS)
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