Household borrowing constraints and residential investment dynamics
Hashmat Khan () and
Jean-François Rouillard ()
Journal of Economic Dynamics and Control, 2018, vol. 95, issue C, 1-18
It is well known that residential investment leads output in the US economy. The main contribution of our paper is to highlight the role of household borrowing constraints in accounting for this fact. We study the role of home-equity loans used to boost consumption as a channel that affects residential investment. We consider a multi-agent model where some home-owning households face borrowing constraints that reflect home-equity loans or refinancing constraints. We show that the severity of the households’ borrowing constraints in an economy can generate this stylized fact of US residential investment dynamics. Interestingly, the model correctly predicts coincident residential investment dynamics in countries with less severe borrowing constraints. This prediction is borne out when the model is calibrated to French data.
Keywords: Home-equity loans; Borrowing constraints; Residential investment; Business cycles (search for similar items in EconPapers)
JEL-codes: E22 E32 R21 R31 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Household Borrowing Constraints and Residential Investment Dynamics (2017)
Working Paper: Household Borrowing Constraints and Residential Investment Dynamics (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:95:y:2018:i:c:p:1-18
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 ().