Household Borrowing Constraints and Residential Investment Dynamics

Hashmat Khan () and Jean-François Rouillard

No 16-07, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: Why does residential investment lead output in the US and Canada but it is coincident in other industrialized countries? In this paper we explore the role of home-equity loans used to boost consumption as a channel that affects residential investment. Towards this end, we consider a multi-agent real business cycle model augmented with household borrowing constraints that re flect home-equity loans or refinancing constraints. The main contribution of our paper is to highlight that the severity of these borrowing constraints in the economy can generate both stylized facts of residential investment dynamics. In US and Canada, a greater proportion of households rely on home-equity loans relative to other industrialized countries. This difference matters for the distinct residential investment dynamics observed across countries.

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)
Pages: 23 pages
Date: 2016-05-30
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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Citations: View citations in EconPapers (1)

Published: Carleton Economic Papers

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Related works:
Journal Article: Household borrowing constraints and residential investment dynamics (2018)
Working Paper: Household Borrowing Constraints and Residential Investment Dynamics (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:16-07

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