Modelling Housing and Consumers' Spending under Liquidity and Borrowing Constraints: Some Stylised Facts from UK Housing Market

Germana Corrado

Ekonomia, 2007, vol. 10, issue 2, 112-137

Abstract: In recent years there has been increasing interest in the role of the housing market. As housing is a major component of individuals’ wealth it is important to understand how house price dynamics may affect consumption. This work focuses on the financial accelerator approach through the ‘collateral’ channel of housing and aims at disentangling the effect of housing in the lifetime decisions of consumption of two groups of households. The first group comprises liquidity constrained households while the second group comprises households who face both liquidity and credit constraints. The model shows that when a subset of households is doubly constrained the resulting distortion towards housing consumption is larger than that found by other life-cycle models with only collateral constrained agents.

JEL-codes: C2 E2 E3 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ekn:ekonom:v:10:y:2007:i:2:p:112-137

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