Abstract

http://ssrn.com/abstract=2024392
 
 

Citations (3)



 


 



Houses as ATMs? Mortgage Refinancing and Macroeconomic Uncertainty


Hui Chen


Massachusetts Institute of Technology; National Bureau of Economic Research (NBER)

Michael Michaux


University of Southern California - Marshall School of Business

Nikolai L. Roussanov


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

September 15, 2013


Abstract:     
We estimate a structural model of household liquidity management in the presence of long-term mortgages. Households face counter-cyclical idiosyncratic labor income uncertainty and borrowing constraints, which affect optimal choices of leverage, precautionary saving in liquid assets and illiquid home equity, debt repayment, mortgage refinancing, and default. Taking the observed historical path of house prices, aggregate income, and interest rates as given, the model quantitatively accounts for the run-up in household debt and consumption boom prior to the financial crisis, their subsequent collapse, and mild recovery following the Great Recession, especially among the most constrained households.

Number of Pages in PDF File: 75

Keywords: mortgage refinancing, home equity, housing collateral, liquidity constraints, household consumption and saving decisions, leverage

JEL Classification: E21, E44, G2

working papers series


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Date posted: June 22, 2012 ; Last revised: September 16, 2013

Suggested Citation

Chen, Hui and Michaux, Michael and Roussanov, Nikolai L., Houses as ATMs? Mortgage Refinancing and Macroeconomic Uncertainty (September 15, 2013). Available at SSRN: http://ssrn.com/abstract=2024392 or http://dx.doi.org/10.2139/ssrn.2024392

Contact Information

Hui Chen
Massachusetts Institute of Technology ( email )
50 Memorial Drive
Cambridge, MA 02142
United States
617-324-3896 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Michael Michaux
University of Southern California - Marshall School of Business ( email )
Marshall School of Business, FBE
3670 Trousdale Parkway, BRI-308
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~michaux/
Nikolai L. Roussanov (Contact Author)
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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