The Effect of House Prices on Household Borrowing: A New Approach

By J. Cloyne, Kilian Huber, Ethan Ilzetzki, H. Kleven. The American Economic Review, 2019

155 citations recorded by the source corpus.

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. (JEL D14, E32, R31)

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d2d84284b40fb4190d4bd15db9314d4753a1e60c

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In Accounting

1. P. Ganong
2. P. Noel
3. Xavier Gabaix
4. Niels Johannesen
5. E. Hansen
6. Adam Sheridan
7. A. Andersen

In Economics and Econometrics

1. P. Ganong
2. P. Noel
3. Xavier Gabaix
4. Niels Johannesen
5. E. Hansen
6. Adam Sheridan
7. A. Andersen
8. M. D. Cattaneo

In Finance

1. P. Ganong
2. P. Noel

Citations in the corpus

• Liquidity versus Wealth in Household Debt Obligations: Evidence from Housing Policy in the Great Recession (2020, background): “6 See Agarwal and Qian (2017), Cloyne et al. (2019), Defusco (2018), and Leth-Petersen (2010).”
• Stock Market Returns and Consumption (2020, unknown): “Davis and Palumbo (2001), Case, Quigley and Shiller (2005, 2011), Carroll, Otsuka, and Slacalek (2011) and Carroll and Zhou (2012) are examples of studies employing aggregate and regional variation in housing and stock wealth and consumption.”