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Search and credit frictions in the housing market

Miroslav Gabrovski () and Victor Ortego-Marti ()

European Economic Review, 2021, vol. 134, issue C

Abstract: This paper develops a model of the housing market with search and credit frictions. The interaction between the two sources of friction gives rise to a novel channel through which the financial sector affects prices and liquidity in the housing market and leads to multiple equilibria. In a numerical exercise, we gauge the relative contribution of credit market shocks to the observed patterns in housing prices, time-to-sell, and mortgage debt-to-price ratio in the U.S. data prior to the 2007 housing market crash. Our results suggest that shocks associated with the credit frictions channel had a relatively larger impact on the observed build-up in mortgage debt and lack of change in time-to-sell than on the increase in prices.

Keywords: Housing market; Credit frictions; Search and matching; Multiple equilibria; Mortgages (search for similar items in EconPapers)
JEL-codes: E2 E32 R21 R31 (search for similar items in EconPapers)
Date: 2021
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Related works:
Working Paper: Search and Credit Frictions in the Housing Market (2020) Downloads
Working Paper: Search and Credit Frictions in the Housing Market (2018) Downloads
Working Paper: Search and Credit Frictions in the Housing Market (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:134:y:2021:i:c:s0014292121000520

DOI: 10.1016/j.euroecorev.2021.103699

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European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

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