Artikel
The cyclical dynamics of illiquid housing, debt, and foreclosures
This paper quantitatively accounts for the cyclical dynamics of key macroeconomic housing and mortgage market variables using a tractable, search-theoretic model of housing with equilibrium mortgage default. To explain these dynamics, the model highlights the importance of liquidity spirals that arise from the interaction of search frictions and endogenous credit constraints. During housing busts, longer selling times spill over into higher foreclosure risk, thereby magnifying the response of credit constraints to the depressed housing market. This contraction in credit then deepens the downturn. During booms, the reverse occurs. Based on these insights, I consider a foreclosure reform that makes all mortgages full recourse, and I show that implementing such a reform would reduce foreclosures and dampen housing dynamics.
- Language
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Englisch
- Bibliographic citation
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Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 7 ; Year: 2016 ; Issue: 1 ; Pages: 289-328 ; New Haven, CT: The Econometric Society
- Classification
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Wirtschaft
- Subject
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Housing
liquidity
search theory
credit constraints
household debt
foreclosure
- Event
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Geistige Schöpfung
- (who)
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Hedlund, Aaron
- Event
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Veröffentlichung
- (who)
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The Econometric Society
- (where)
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New Haven, CT
- (when)
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2016
- DOI
-
doi:10.3982/QE483
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Hedlund, Aaron
- The Econometric Society
Time of origin
- 2016
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