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The effect of house prices on household borrowing: a new approach

Cloyne, James, Huber, Kilian, Ilzetzki, Ethan and Kleven, Henrik (2019) The effect of house prices on household borrowing: a new approach. American Economic Review, 109 (6). pp. 2104-2136. ISSN 0002-8282

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Identification Number: 10.1257/aer.20180086


We investigate the effect of house prices on household borrowing using administrative mortgage data from the United Kingdom and a new empirical approach. The data contain household-level information on house prices and borrowing in a panel of homeowners, who refinance at regular and quasi-exogenous intervals. The data and setting allow us to develop an empirical approach that exploits house price variation coming from the idiosyncratic and exogenous timing of refinance events around the Great Recession. We present two main results. First, there is a clear and robust effect of house prices on borrowing. Second, the effect of house prices on borrowing can be explained largely by collateral effects. We study the collateral channel through a multivariate and nonparametric heterogeneity analysis of proxies for collateral and wealth effects.

Item Type: Article
Additional Information: © 2019 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Date Deposited: 25 Jun 2019 10:06
Last Modified: 20 Oct 2021 00:57

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