Search Results
Showing results 1 to 10 of approximately 27.
(refine search)
Working Paper
A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession
We investigate the impact of Great Recession policies in California that substantially increased lender pecuniary and time costs of foreclosure. We estimate that the California Foreclosure Prevention Laws (CFPLs) prevented 250,000 California foreclosures (a 20% reduction) and created $300 billion in housing wealth. The CFPLs boosted mortgage modifications and reduced borrower transitions into default. They also mitigated foreclosure externalities via increased maintenance spending on homes that entered foreclosure. The CFPLs had minimal adverse side effects on the availability of mortgage ...
Working Paper
Financial Business Cycles
Using Bayesian methods, I estimate a DSGE model where a recession is initiated by losses suffered by banks and exacerbated by their inability to extend credit to the real sector. The event triggering the recession has the workings of a redistribution shock: a small sector of the economy -- borrowers who use their home as collateral -- defaults on their loans. When banks hold little equity in excess of regulatory requirements, the losses require them to react immediately, either by recapitalizing or by deleveraging. By deleveraging, banks transform the initial shock into a credit crunch, and, ...
Working Paper
Oil Price Elasticities and Oil Price Fluctuations
We study the identification of oil shocks in a structural vector autoregressive (SVAR) model of the oil market. First, we show that the cross-equation restrictions of a SVAR impose a nonlinear relation between the short-run price elasticities of oil supply and oil demand. This relation implies that seemingly plausible restrictions on oil supply elasticity may map into implausible values of the oil demand elasticity, and vice versa. Second, we propose an identification scheme that restricts these elasticities by minimizing the distance between the elasticities allowed by the SVAR and target ...
Working Paper
Housing and debt over the life cycle and over the business cycle
We study housing and debt in a quantitative general equilibrium model. In the cross-section, the model matches the wealth distribution, the age pro.les of homeownership and mortgage debt, and the frequency of housing adjustment. In the time-series, the model matches the procyclicality and volatility of housing investment, and the procyclicality of mortgage debt. We use the model to conduct two experiments. First, we investigate the consequences of higher individual income risk and lower downpayments, and .nd that these two changes can explain, in the model and in the data, the reduced ...
Working Paper
Likelihood Evaluation of Models with Occasionally Binding Constraints
Applied researchers interested in estimating key parameters of DSGE models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and likelihood misspecification, related to the treatment of measurement errors, can interact and compound each other.
Working Paper
Housing wealth and consumption
Housing wealth is about one half of household net worth, and consumption is a considerable fraction (about two thirds) of Gross Domestic Product in the United States. Empirically, movements in housing wealth are associated with movements in consumption in the same direction. This observation has led many economists, commentators and policy makers to study how housing wealth and consumption are linked together. A sizeable portion of the comovement between housing wealth and consumption reflects common factors driving both variables, rather than the "wealth effect" of the former on the ...
Working Paper
Raising an Inflation Target : The Japanese Experience with Abenomics
This paper draws from Japan?s recent monetary experiment to examine the effects of an increase in the inflation target during a liquidity trap. We review Japanese data and examine through a VAR model how macroeconomic variables respond to an identified inflation target shock. We apply these findings to calibrate the effect of a shock to the inflation target in a new-Keynesian DSGE model of the Japanese economy. We argue that imperfect observability of the inflation target and a separate exchange rate shock are needed to successfully account for the behavior of nominal and real variables in ...
Working Paper
Measuring Geopolitical Risk
We present a news-based measure of adverse geopolitical events and associated risks. The geopolitical risk (GPR) index spikes around the two world wars, at the beginning of the Korean War, during the Cuban Missile Crisis, and after 9/11. Higher geopolitical risk foreshadows lower investment and employment and is associated with higher disaster probability and larger downside risks. The adverse consequences of the GPR index are driven by both the threat and the realization of adverse geopolitical events. We complement our aggregate measures with industry- and firm-level indicators of ...
Working Paper
OccBin: A Toolkit for Solving Dynamic Models With Occasionally Binding Constraints Easily
We describe how to adapt a first-order perturbation approach and apply it in a piecewise fashion to handle occasionally binding constraints in dynamic models. Our examples include a real business cycle model with a constraint on the level of investment and a New Keynesian model subject to the zero lower bound on nominal interest rates. We compare the piecewise linear perturbation solution with a high-quality numerical solution that can be taken to be virtually exact. The piecewise linear perturbation method can adequately capture key properties of the models we consider. A key advantage of ...
Working Paper
Oil Prices and Consumption across Countries and U.S. States
We study the effects of oil prices on consumption across countries and U.S. states, by exploiting the time-series and cross-sectional variation in oil dependency of these economies. We build two large datasets: one with 55 countries over the years 1975-2018, and another with all U.S. states over the period 1989-2018. We then show that oil price declines generate positive effects on consumption in oil-importing economies, while depressing consumption in oil-exporting economies. We also document that oil price increases do more harm than the good afforded by oil price decreases both in the ...