Borrowing constraints and housing market liquidity

Essi Eerola and Niku Määttänen

Review of Economic Dynamics, 2018, vol. 27, 184-204

Abstract: We study how changes in household borrowing constraints influence housing market liquidity. To this end, we develop a housing market model with both matching and credit frictions. In the model, risk-averse households may save or borrow in order to smooth consumption over time and finance owner housing. Prospective sellers and buyers meet randomly and bargain over the price. In the model, housing market liquidity is very sensitive to changes in household credit conditions. In particular, a moderate tightening of household borrowing constraints increases the average time-on-the-market and idiosyncratic price dispersion substantially. (Copyright: Elsevier)

Keywords: Housing; Borrowing constraint; Matching (search for similar items in EconPapers)
JEL-codes: C78 E21 R21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2017.07.003
A subscription to ScienceDirect is required

Related works:
Software Item: Code and data files for "Borrowing constraints and housing market liquidity" (2017)
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:red:issued:15-259

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2017.07.003

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().