Household Debt and Crises of Confidence

Arbeitspapier

We show that the size of collateralized household debt determines an economy’s vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt levels this liquidity feedback effect is strong enough to give rise to multiplicity of house prices. In a dynamic setup, we conceptualize confidence as a realization of rationally entertainable belief-weightings of multiple future prices. This delivers debt-level-dependent bounds on the extent to which confidence may drive house prices and aggregate consumption.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bonn Econ Discussion Papers ; No. 06/2015

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Business Fluctuations; Cycles ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Thema: Household debt ; Consumer confidence ; Collateral constraints ; Multiple equilibria

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Hintermaier, Thomas ; Koeniger, Winfried
• Ereignis: Veröffentlichung
• (wer): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (wo): Bonn
• (wann): 2015

Weitere Informationen

• Handle: http://hdl.handle.net/10419/128621
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ