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Credit Constraints, House Prices, and the Impact of Life Cycle Dynamics

Aaron Hedlund

No 1807, Working Papers from Department of Economics, University of Missouri

Abstract: How does the life cycle|namely, mortality risk and the expectation at birth of a rising age-profile of income and assets--impact house price dynamics? This paper investigates how equilibrium house prices respond to a tightening in credit constraints under two different but similarly calibrated models: one an infinite-horizon setting and the other a life-cycle environment. The main conclusion is that house price dynamics are magnified by the presence of life cycle features. Two primary explanations stand out: the distinction between stocks and flows of mortgage debt in the cross-section and the importance of gross housing tenure flows, i.e. churn.

Keywords: House Prices; Mortgage Debt; Credit Constraints; Life Cycle Models (search for similar items in EconPapers)
JEL-codes: D15 D31 E21 E44 G11 G12 G21 R21 R31 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2018-04-23
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1807

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