Do Credit Constraints Amplify Macroeconomic Fluctuations?

Liu, Zheng; Wang, Pengfei; Zha, Tao

doi:10.2139/ssrn.2481183

“…The variables z and j represent exogenous shocks to aggregate demand and housing demand, respectively. The housing preference shock can capture either a simple taste shock (see Iacoviello and Neri ) or some unmodeled features of housing demand and credit markets, such as financial innovations or credit market deregulation (see Liu, Wang, and Zha ). Households are price setters in the labor market.…”

Section: Dsge Model Estimationmentioning

confidence: 99%

Do Central Banks React to House Prices?

Finocchiaro

¹

,

Heideken

²

2013

J of Money Credit Banking

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in

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“…This result is, however, conditional on the fundamental shocks that drive the business cycle. Financial constraints do amplify shocks that shift the demand of collateral (Liu et al (2010)). Nezafat and Slavik (2010) find that such shocks are capable of generating asset price volatility in the model comparable to that of the aggregate stock market in the data.…”

Section: Introductionmentioning

confidence: 99%

The Great Escape? A Quantitative Evaluation of the Fed’s Liquidity Facilities

Negro

¹

,

Eggertsson

²

,

Ferrero

³

et al. 2011

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in

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“…(), Darracq Pariès and Notarpietro (), Finocchiaro and Queijo von Heideken (), Liu et al . (), and Piazzesi and Schneider ().…”

mentioning

confidence: 99%

Housing Collateral and the Monetary Transmission Mechanism

Walentin

¹

2014

Scandinavian J Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Working Paper series presents reports on matters in the sphere of activities of the Riksbank that are considered to be of interest to a wider public. The papers are to be regarded as reports on ongoing studies and the authors will be pleased to receive comments. Terms of use: Documents inThe views expressed in Working Papers are solely the responsibility of the authors and should not to be interpreted as reflecting the views of the Executive Board of Sveriges Riksbank. Housing collateral and the monetary transmission mechanismKarl Walentin and Peter Sellin y Sveriges Riksbank Working Paper No. 239April 2010 AbstractIn this paper our main aim is to quantify the role that housing collateral plays for the monetary transmission mechanism. Furthermore, we want to explore the implications of the increase in household indebtedness, and speci…cally the loan-to-value ratio, in the last two decades. We set up a two sector DSGE model with production of goods and housing. Households can only borrow by using their houses as collateral. The structure of the model closely follows Iacoviello and Neri (2010). To be able to do quantitatively relevant exercises we estimate the model using Bayesian methods on Swedish data for 1986q1-2008q3. We quantify the reinforcement of the monetary transmission mechanism that housing used as collateral implies in the presence of nominal loan contracts. This mechanism functions through the e¤ects of the interest rate on house prices as well as on in ‡ation and thereby the real value of nominal debt. This component of the monetary transmission mechanism becomes stronger the higher the loan-to-value ratio is. A change in the maximum loan-to-value ratio from 85% to 95%, all else being equal, implies that the e¤ect of a monetary policy shock is increased by 4% for in ‡ation, 8% for GDP and 24% for consumption. We conclude that to properly understand the monetary transmission mechanism and its changing nature over time, we need to take into account the e¤ects of housing related collateral constraints.

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Do Credit Constraints Amplify Macroeconomic Fluctuations?

Cited by 24 publications

References 65 publications

Do Central Banks React to House Prices?

Do Central Banks React to House Prices?

The Great Escape? A Quantitative Evaluation of the Fed’s Liquidity Facilities

Housing Collateral and the Monetary Transmission Mechanism

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