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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27389
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| Title: | The Financial Accelerator: Evidence from the International Housing Markets |
| Authors: | Almeida, Heitor
Campello, Murillo
Liu, Crocker |
| Keywords: | Financial contracting
nancial accelerator
housing prices
collateral constraint
income constraint |
| Issue Date: | 18-Oct-2005 |
| Series/Report no.: | FIN-06-017 |
| Abstract: | This paper shows novel evidence on the mechanism through which financial
constraints amplify uctuations in asset prices and credit demand. It
does so using contractual features of housing finance. Among agents
whose housing demand is constrained by the availability of collateral,
those who can borrow against a larger fraction of their housing value
(achieve a higher loan-to-value, or LTV, ratio) have more procyclical
debt capacity. This procyclicality underlies the nancial accelerator
mechanism described by Stein (1995) and Bernanke et al. (1996). Our
study uses international variation in maximum LTV ratios over three
decades to test whether (a) housing prices and (b) demand for new
mortgage borrowings are more sensitive to income shocks in countries
where households can achieve higher LTV ratios. The results we obtain
are consistent with the dynamics of a collateral-based financial
accelerator in housing markets. |
| URI: | http://hdl.handle.net/2451/27389 |
| Appears in Collections: | Finance Working Papers
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