Search Results
Journal Article
Life cycle patterns and boom-bust dynamics in U.S. housing prices
Home equity did not increase much for households younger than 35 years of age between 1998 and 2007 because the increase in house prices was offset by an equivalent increase in mortgage debt.
Journal Article
Europe may provide lessons on preventing mortgage defaults
During the last global recession, house prices fell in some European countries almost as much as in some U.S. states. However, mortgage defaults occurred at a much lower rate in Europe. The authors say the difference might be explained by two regulations that apply in Europe but are used on a limited or much less restrictive basis in the U.S.
Working Paper
Mortgage defaults
We present a model in which households facing income and housing-price shocks use long-term mortgages to purchase houses. Interest rates on mortgages reflect the risk of default. The model accounts for observed patterns of housing consumption, mortgage borrowing, and defaults. We use the model as a laboratory to evaluate default-prevention policies. While recourse mortgages make the penalty for default harsher and thus may lower the default rate, they also lower equity and increase payments and thus may increase the default rate. Introducing loan-to-value (LTV) limits for new mortgages ...
Working Paper
International Reserves and Rollover Risk
We study the optimal accumulation of international reserves in a quantitative model of sovereign default with long-term debt and a risk-free asset. Keeping higher levels of reserves provides a hedge against rollover risk, but this is costly because using reserves to pay down debt allows the government to reduce sovereign spreads. Our model, parameterized to mimic salient features of a typical emerging economy, can account for a significant fraction of the holdings of international reserves, and the larger accumulation of both debt and reserves in periods of low spreads and high income. We ...
Briefing
What income inequality measures can (and cannot) tell us
In recent decades, income inequality has increased. But this doesn't mean that those with lower incomes are relatively worse off.
Journal Article
The economics of sovereign defaults
Journal Article
Why could political incentives be different during election times?
Why could political incentives be different during election times? This article provides answers to this question using a career-concern model of political cycles. The analysis in the article is also relevant to understanding other agency relationships in which an important part of compensation is decided on infrequently.
Journal Article
On the evolution of income inequality in the United States
This article discusses the evolution of income inequality in the United States. We focus mainly on the evolution of inequality since the 1960s because more data are available for this period than for earlier periods. We document that income inequality rose in the United States during the period under study. Furthermore, our article documents periods characterized by a decline in real income for lower income groups. We show that the increase in inequality is concentrated among individuals with higher income and we explain that welfare inequality may have increased less than income inequality ...