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Home Equity, Mobility, and Macroeconomic Fluctuations


  • Vincent Sterk

    (De Nederlandsche Bank, University of Amsterdam)


How does a fall in house prices a¤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 di¢ 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.

Suggested Citation

  • Vincent Sterk, 2011. "Home Equity, Mobility, and Macroeconomic Fluctuations," 2011 Meeting Papers 117, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:117

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    References listed on IDEAS

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    Cited by:

    1. Luca Sala & Ulf Söderström & Antonella Trigari, 2013. "Structural and Cyclical Forces in the Labor Market during the Great Recession: Cross-Country Evidence," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 9(1), pages 345-404.
    2. 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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