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Collateral constraints and macroeconomic asymmetries

Luca Guerrieri () and Matteo Iacoviello ()

No 202, NBP Working Papers from Narodowy Bank Polski, Economic Research Department

Abstract: Using Bayesian methods, we estimate a nonlinear general equilibrium model where occasionally binding collateral constraints on housing wealth drive an asymmetry in the link between housing prices and economic activity. The estimated model shows that, as collateral constraints became slack during the housing boom of 2001-2006, expanding housing wealth made a small contribution to consumption growth. By contrast, the housing collapse that followed tightened the constraints and sharply exacerbated the recession of 2007-2009. The empirical relevance of this asymmetry is corroborated by evidence from state- and MSA-level data.

Keywords: Housing; Collateral Constraints; Occasionally Binding Constraints; Nonlinear Estimation of DSGE Models; Great Recession (search for similar items in EconPapers)
JEL-codes: E32 E44 E47 R21 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
Date: 2015
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Related works:
Journal Article: Collateral constraints and macroeconomic asymmetries (2017) Downloads
Working Paper: Collateral constraints and macroeconomic asymmetries (2013) Downloads
Working Paper: Collateral Constraints and Macroeconomic Asymmetries (2012) Downloads
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