Collateral Constraints and Macroeconomic Asymmetries

National Bank of Poland Working Paper No. 202

63 Pages Posted: 22 Aug 2015 Last revised: 9 Jul 2016

See all articles by Luca Guerrieri

Luca Guerrieri

Federal Reserve Board - Trade and Financial Studies

Matteo M. Iacoviello

Federal Reserve Board - Trade and Financial Studies

Multiple version iconThere are 2 versions of this paper

Date Written: April 10, 2015

Abstract

Using Bayesian methods, we estimate a nonlinear general equilibrium model where occasionally binding collateral constraints on housing wealth drive an asymmetry in the link between housing prices and economic activity. The estimated model shows that, as collateral constraints became slack during the housing boom of 2001-2006, expanding housing wealth made a small contribution to consumption growth. By contrast, the housing collapse that followed tightened the constraints and sharply exacerbated the recession of 2007-2009. The empirical relevance of this asymmetry is corroborated by evidence from state- and MSA-level data.

Keywords: Housing; Collateral Constraints; Occasionally Binding Constraints; Nonlinear Estimation of DSGE Models; Great Recession

JEL Classification: E32, E44, E47, R21, R31

Suggested Citation

Guerrieri, Luca and Iacoviello, Matteo M., Collateral Constraints and Macroeconomic Asymmetries (April 10, 2015). National Bank of Poland Working Paper No. 202. Available at SSRN: https://ssrn.com/abstract=2648869 or http://dx.doi.org/10.2139/ssrn.2648869

Luca Guerrieri (Contact Author)

Federal Reserve Board - Trade and Financial Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2550 (Phone)

Matteo M. Iacoviello

Federal Reserve Board - Trade and Financial Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

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