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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26516
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| Title: | How Much Does Household Collateral Constrain Regional Risk Sharing? |
| Authors: | Lustig, Hanno
Nieuwerburgh, Stijn Van |
| Keywords: | Regional risk sharing
housing collateral |
| Issue Date: | 4-Aug-2005 |
| Series/Report no.: | FIN-04-009 |
| Abstract: | The covariance of regional consumption varies cross-sectionally and over
time. Household-level borrowing frictions can explain this aggregate
phenomenon. When the value of housing falls, loan collateral shrinks,
borrowing (risk-sharing) declines, and the sensitivity of consumption to
income increases. Using panel data from 23 US metropolitan areas, we
find that in times and regions where collateral is scarce, consumption
growth is about twice as sensitive to income growth. Our model
aggregates heterogeneous, borrowing-constrained households into regions
characterized by a common housing market. The resulting regional
consumption patterns quantitatively match the data. |
| URI: | http://hdl.handle.net/2451/26516 |
| Appears in Collections: | Finance Working Papers
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