Household Leverage

Stefano Corradin

Journal of Money, Credit and Banking, 2014, vol. 46, issue 4, 567-613

Abstract: I propose a life‐cycle model where a finitely lived risk‐averse household finances its housing investment by opting to provide a down payment. Given that the household may default, risk‐neutral lenders efficiently charge a default premium to hedge against expected losses. This has two major consequences. First, the higher the house price volatility, the higher the down payment the household provides to decrease the volatility of the equity share in the house. Second, in the presence of borrowing constraints, higher risk of unemployment persistence and/or a substantial drop in labor income decreases the leveraged position the household takes on.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12118

Related works:
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:wly:jmoncb:v:46:y:2014:i:4:p:567-613

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().