EconPapers    
Economics at your fingertips  
 

Mortgage default in an estimated model of the U.S. housing market

Luisa Lambertini, Victoria Nuguer and Pinar Uysal ()

Journal of Economic Dynamics and Control, 2017, vol. 76, issue C, 171-201

Abstract: This paper models the housing sector, mortgages and endogenous default in a DSGE setting with nominal and real rigidities. We use data for the period 1981–2006 to estimate our model using Bayesian techniques. We analyze how an increase in risk in the mortgage market raises the default rate and spreads to the rest of the economy, creating a recession. In our model two shocks are well suited to replicate the subprime crisis and the Great Recession: the mortgage risk shock and the housing demand shock. Next we use our estimated model to evaluate a policy that reduces the principal of underwater mortgages. This policy is successful in stabilizing the mortgage market and makes all agents better off.

Keywords: Housing; Mortgage default; DSGE model; Bayesian estimation (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188917300155
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Mortgage Default in an Estimated Model of the U.S. Housing Market (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:76:y:2017:i:c:p:171-201

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-06-11
Handle: RePEc:eee:dyncon:v:76:y:2017:i:c:p:171-201