Household debt and crises of confidence
- We show that the size of collateralized household debt determines an economy’s vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt levels this liquidity feedback effect is strong enough to give rise to multiplicity of house prices. In a dynamic setup, we conceptualize confidence as a realization of rationally entertainable belief-weightings of multiple future prices. This delivers debt-level-dependent bounds on the extent to which confidence may drive house prices and aggregate consumption.
Author: | Thomas Hintermaier, Winfried KoenigerORCiDGND |
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URN: | urn:nbn:de:hebis:30:3-386603 |
URL: | http://ssrn.com/abstract=2672944 |
Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 519 |
Series (Serial Number): | CFS working paper series (519) |
Publisher: | Center for Financial Studies |
Place of publication: | Frankfurt, M. |
Document Type: | Working Paper |
Language: | English |
Date of Publication (online): | 2015/10/14 |
Date of first Publication: | 2015/10/14 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2015/12/08 |
Tag: | Collateral constraints; Consumer confidence; Household debt; Multiple equilibria |
Issue: | This version: October 1, 2015 |
Page Number: | 55 |
Note: | First version: February 2012 – This version: October 1, 2015 |
HeBIS-PPN: | 36852325X |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |