Houses as ATMs? Mortgage Refinancing and Macroeconomic Uncertainty

Hui Chen (), Michael Michaux and Nikolai Roussanov

No 19421, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E21 E44 G21 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-ban, nep-dge, nep-mac and nep-ure
Note: AP EFG ME
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Citations: View citations in EconPapers (40)

Published as HUI CHEN & MICHAEL MICHAUX & NIKOLAI ROUSSANOV, 2020. "Houses as ATMs: Mortgage Refinancing and Macroeconomic Uncertainty," The Journal of Finance, vol 75(1), pages 323-375.

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Related works:
Journal Article: Houses as ATMs: Mortgage Refinancing and Macroeconomic Uncertainty (2020)
Working Paper: Houses as ATMs? Mortgage Refinancing and Macroeconomic Uncertainty (2011)
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