|
Archive@NYU >
Stern School of Business >
Salomon Center >
Macro Finance >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27306
|
| Title: | Housing Collateral and Consumption Insurance Across US Regions |
| Authors: | Lustig, Hanno
Nieuwerburgh, Stijn Van |
| Issue Date: | 11-May-2004 |
| Series/Report no.: | S-MF-04-10 |
| Abstract: | Time-variation in the degree of risk-sharing induced by changes in the
value of housing collateral sheds new light on the consumption
correlation puzzle. If debts can only be enforced to the extent that
they are collateralized by housing wealth, a decrease in the value of
housing collateral endogenously increases exposure to idiosyncratic
risk. This increases the cross-sectional consumption growth dispersion
across regions and it reduces the amount of regional income risk shared.
We investigate risk-sharing patterns for the 30 largest US metropolitan
areas and find empirical support for the housing collateral channel. In
times when housing collateral is scarce, the dispersion of consumption
growth relative to income growth is twice as high as when collateral is
abundant. A structural estimation of the model's consumption dynamics
implies a time path for consumption growth dispersion that matches the
one in the data. The housing collateral effect is the key element that
enables this match. |
| URI: | http://hdl.handle.net/2451/27306 |
| Appears in Collections: | Macro Finance
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
