cover image: lnstitute for Fiscal Studies - House price rises and borrowing to invest

20.500.12592/8t7p9z

lnstitute for Fiscal Studies - House price rises and borrowing to invest

6 Apr 2022

Clearly in this example the balance sheet of the household has expanded quickly, and we show in the solution to the complete model how the presence of credit constraints and frictions moderate households’ desire and ability to do this. [...] If they answer in the affirmative, they are then asked to give the exact amount spent.4 For house prices, we use regional/state-level data on the prices of transacted houses published by the Office for National Statistics (for the UK) and the Federal Housing Finance Agency (for the US). [...] The spending questions included in the PSID are not as detailed as in the LCFS, and so we are forced to define categories differently for the US. [...] This suggests an asymmetry in the ease of re-leveraging and de-leveraging in 8The differences in the age path of leverage in the UK and the US may reflect differences in the tax treatment of interest payments or in other institutional details, but disentangling these effects is beyond the scope of this paper. [...] With this specification, the direct effect of prices is no longer identified, but the interaction between house prices and leverage is identified and this is the basis of the test of our mechanism.
Pages
59
Published in
United Kingdom