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Working Paper
Mortgages and monetary policy
Mortgages are long-term nominal loans. Under incomplete asset markets, monetary policy is shown to affect housing investment and the economy through the cost of new mortgage borrowing and the value of payments on outstanding debt. These channels, distinct from traditional transmission of monetary policy, are evaluated within a general equilibrium model. Persistent monetary policy shocks, resembling the level factor in the nominal yield curve, have larger effects than transitory shocks, manifesting themselves as long-short spread. The transmission is stronger under adjustable- than fixed-rate ...
Working Paper
Mortgage contracts and housing tenure decisions
In this paper, we analyze various mortgage contracts and their implications for housing tenure and investment decisions using a model with heterogeneous consumers and liquidity constraints. We find that different types of mortgage contracts influence these decisions through three dimensions: the downpayment constraint, the payment schedule, and the amortization schedule. Contracts with lower downpayment requirements allow younger and lower income households to enter the housing market earlier. Mortgage contracts with increasing payment schedules increase the participation of first-time ...
Speech
Demographics, redistribution, and optimal inflation
May 30, 2012. "Demographics, Redistribution, and Optimal Inflation," with Carlos Garriga and Christopher J. Waller. Presented by Christopher Waller at the 2012 BOJ-IMES Conference Demographic Changes and Macroeconomic Performance.
Working Paper
Equilibrium mortgage choice and housing tenure decisions with refinancing
The last decade has brought about substantial mortgage innovation and increased refinancing. The objective of the paper is to understand the determinants and implications of mortgage choice in the context of general equilibrium model with incomplete markets. The equilibrium characterization allows us to study the impact of mortgage financing = decisions in the productive economy. We show the influence of different contract characteristics such as the downpayment requirement, repayment structure, and the amortization schedule for mortgage choice. We find that loan products that allow for low ...
Journal Article
Where is the slack in the labor market?
Current slack in the economy may be caused primarily by the construction sector.
Journal Article
Recent trends in homeownership
The homeownership rate began to trend upward in 1995 after years of being relatively constant, near 64 percent. This article describes recent changes in the share of U.S. housing that is owner-occupied and explores the reasons for the surprising rise over the past decade. Explanations that have been offered include demographics, low mortgage rates, changes in housing policy, and innovations in the mortgage financial market. Of all these explanations, the most plausible one is that innovations in the financial markets increased access to mortgage finance, mainly by reducing downpayment ...
Journal Article
A primer on social security systems and reforms
This article reviews the characteristics of different social security systems. Many configurations arise depending on the nature of a system?s funding and determination of benefits. Many reforms propose changing the U.S. Social Security system. The authors focus their analysis of the transition from a pay-as-you-go to a fully funded system. They argue that the key component of any reform is the treatment of the implicit liabilities of a country?s social security system. The welfare gains accruing to some cohorts as a result of such reforms usually stem from either a partial or complete ...
Journal Article
Boom & gloom in housing markets: the sequel
Ready for the Pandemic? Household Debt before the COVID-19 Shock
Before the pandemic, shares of delinquencies had already been growing in consumer finance loans, credit card debt, student loans and auto loans. And delinquencies can vary greatly among states.
Journal Article
The Homeownership Experience of Minorities During the Great Recession
It has been argued that during the Great Recession, wealth losses were more concentrated for college-educated Black and Hispanic families than for White and Asian college-educated families and their non-college-educated Black and Hispanic peers. This article explores the extent to which the homeownership experience for families who purchased homes between 2004 and 2008 is a potentially important factor in explaining this finding. During the housing boom, the increase in homeownership for Blacks and Hispanics was very similar, but the second group had a smaller decline. Despite these ...