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House prices and risk sharing

  • Dmytro Hryshko

    ()

    (University of Alberta)

  • María José Luengo-Prado

    ()

    (IMDEA Social Sciences)

  • Bent E. Sørensen

    ()

    (University of Houston)

Homeowners in the Panel Study of Income Dynamics are able to maintain a high level of consumption following job loss (or disability) in periods of rising local house prices while the consumption drop for homeowners who lose their job in times of lower house prices is substantial. These results are consistent with homeowners being able to access wealth gains when housing appreciates as witnessed by their ability to smooth consumption more than renters. A calibrated model of endogenous homeownership and consumption is able to reproduce the patterns in the data quite well and provides an interpretation of the empirical results.

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Paper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2010-17.

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Date of creation: 16 Aug 2010
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Publication status: Published in Journal of Monetary Economics 57(8), November 2010: 975-987
Handle: RePEc:imd:wpaper:wp2010-17
Note: This paper is included in the IMDEA Social Sciences Working Paper Series through the Institute's Visiting Researchers Programme
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