scholarly journals A Simple Model of Subprime Borrowers and Credit Growth

2016 ◽  
Vol 106 (5) ◽  
pp. 543-547 ◽  
Author(s):  
Alejandro Justiniano ◽  
Giorgio E. Primiceri ◽  
Andrea Tambalotti
Keyword(s):  
Simple Model ◽  
Interest Rates ◽  
Low Income ◽  
Great Recession ◽  
House Prices ◽  
Credit Growth ◽  
Geographic Locations ◽  
The Great Recession ◽  
Interest Payments

The surge in credit and house prices that preceded the Great Recession was particularly pronounced in ZIP codes with a higher fraction of subprime borrowers (Mian and Sufi, 2009). We present a simple model with prime and subprime borrowers distributed across geographic locations, which can reproduce this stylized fact as a result of an expansion in the supply of credit. Due to their low income, subprime households are constrained in their ability to meet interest payments and hence sustain debt. As a result, when the supply of credit increases and interest rates fall, they take on disproportionately more debt than their prime counterparts, who are not subject to that constraint.

Real Estate

2017 ◽  
Author(s):  
Stefan Homburg
Keyword(s):  
Real Estate ◽  
Great Recession ◽  
House Prices ◽  
Borrowing Constraints ◽  
Macroeconomic Models ◽  
Land Prices ◽  
The Great Recession ◽  
Quantitative Importance

Chapter 6 examines real estate as a neglected feature of actual economies. It begins with an empirical overview demonstrating the preeminent role of land as a part of nonfinancial wealth. Whereas many macroeconomic models represent nonfinancial wealth by a symbol K that is interpreted as machines and equipment (if not robots), the text makes clear that such items are of minor quantitative importance. In contemporary economies, nonfinancial wealth consists chiefly of real estate. This is the proper reason so many analysts conjecture a link between house prices and the Great Recession. Changes in house prices (primarily changes in land prices) operate on the economy through their influence on nonfinancial wealth. Nonfinancial wealth affects consumption directly and investment indirectly since it relaxes or tightens borrowing constraints. Building on the results obtained in previous chapters, the text studies housing manias and leverage cycles and relates its main findings to US data.

scholarly journals Money and credit during normal times and house price booms: evidence from time-frequency analysis

Empirica ◽  
2019 ◽  
Vol 47 (4) ◽  
pp. 835-861
Author(s):  
Maciej Ryczkowski
Keyword(s):  
Great Recession ◽  
House Prices ◽  
House Price ◽  
Industrialized Countries ◽  
Time Frequency ◽  
The Great Recession ◽  
Time Period ◽  
Price Boom ◽  
The Us ◽  
Short Run

Abstract I analyse the link between money and credit for twelve industrialized countries in the time period from 1970 to 2016. The euro area and Commonwealth Countries have rather strong co-movements between money and credit at longer frequencies. Denmark and Switzerland show weak and episodic effects. Scandinavian countries and the US are somewhere in between. I find strong and significant longer run co-movements especially around booming house prices for all of the sample countries. The analysis suggests the expansionary policy that cleans up after the burst of a bubble may exacerbate the risk of a new house price boom. The interrelation is hidden in the short run, because the co-movements are then rarely statistically significant. According to the wavelet evidence, developments of money and credit since the Great Recession or their decoupling in Japan suggest that it is more appropriate to examine the two variables separately in some circumstances.

scholarly journals Extremely low-income households, housing affordability and the Great Recession

Urban Studies ◽  
2017 ◽  
Vol 55 (8) ◽  
pp. 1615-1635 ◽  
Author(s):  
Michael C Lens
Keyword(s):  
Low Income ◽  
Great Recession ◽  
Regression Models ◽  
Low Cost ◽  
Rental Housing ◽  
Housing Affordability ◽  
Median Income ◽  
Section 8 ◽  
The Great Recession ◽  
Housing Subsidies

The effects of the Great Recession on housing equity and homeownership have been well-documented. However, we know little about how rental households fared and the efficacy of housing subsidies in addressing affordability gaps. This paper examines the extent to which rental housing became less affordable for Extremely Low-Income (ELI) households – those earning less than 30% of the Area Median Income (AMI). I then run regression models to determine the local characteristics most strongly associated with larger affordability gaps, with a focus on whether housing subsidies are effective at combating such gaps. Rental affordability gaps became more pronounced during the Great Recession. In nearly 70% of the counties in my sample, there was an increase from 2007 to 2010 in the number of ELI households per affordable rental unit. Across the country, the increase was 17%, a dramatic increase in only three years. There is considerable variation across the country, with acute affordability crises often concentrated in the South, particularly Florida. Regression models provide compelling evidence that housing vouchers, public housing, and project-based Section 8 subsidies play an important role in limiting the extent to which large numbers of ELI households are competing for a shortage of low-cost rental units. However, these programmes do not respond quickly to local needs – such as those brought about by the Great Recession. A pilot study where local housing authorities had funding to be more agile and responsive would be an important step toward crafting better policy.

scholarly journals Theory and Practice of Crisis in Political Economy: The Case of the Great Recession in Spain

2021 ◽  
pp. 048661342110272
Author(s):  
Juan Pablo Mateo
Keyword(s):  
Political Economy ◽  
Labor Market ◽  
Interest Rates ◽  
Great Recession ◽  
Jel Classification ◽  
Theory And Practice ◽  
Housing Bubble ◽  
Surplus Value ◽  
The Great Recession ◽  
Labor Market Rigidities

This paper addresses Marx’s theory of crisis in order to analyze the Great Recession in Spain, a peripheral economy within the Eurozone. It demonstrates that underlying the problem of the “housing bubble” is an incapacity to generate surplus value, which in turn explains certain particularities related to capital composition, productivity, wages, and finance. The article further carries out a critique of both orthodox and heterodox approaches that focus on (1) profit squeeze caused by labor market rigidities, (2) underconsumption due to stagnant wages, and (3) finances, interest rates, and indebtedness JEL classification: B14, E11, E20, E43, J30

scholarly journals A Toolkit to Assess the Consistency Between Real Sector and Financial Sector Forecasts

2017 ◽  
Vol 17 (09) ◽  
Author(s):  
Sophia Chen ◽  
Paola Ganum ◽  
Pau Rabanal
Keyword(s):  
Low Income ◽  
House Prices ◽  
Financial Sector ◽  
Low Income Countries ◽  
Real Sector ◽  
Credit Growth ◽  
Advanced Economies ◽  
Financial Account ◽  
Empirical Regularities ◽  
The Relationship

e develop a toolkit to assess the consistency between real sector and financial sector forecasts. The toolkit draws upon empirical regularities on real sector and financial sector outcomes for 182 economies from 1980 to 2015. We show that credit growth is positively correlated with real sector performance, in particular when credit growth is unusually high or low. However, the relationship between credit growth and inflation is weak. These results hold for different country groups, including advanced economies, emerging markets and low-income countries. Combining credit growth with other variables such as house prices and the output gap helps to understand real sector outcomes. But including the financial account balance does not make a difference.

Constrained Credit

2017 ◽  
Author(s):  
Stefan Homburg
Keyword(s):  
Interest Rates ◽  
Great Recession ◽  
Borrowing Constraints ◽  
Monetary Policies ◽  
The Great Recession ◽  
Credit Creation ◽  
Advanced Economies ◽  
Borrowing Constraint ◽  
Depth Analysis ◽  
Money Creation

Chapter 4 considers economies with borrowing constraints. This assumption is motivated by the observation that monetary expansions after the Great Recession did not entail inflation in the expected manner. At the same time, nominal and real interest rates tended to decline in many advanced economies. The text offers an in-depth analysis of credit crunches, liquidity traps, and interest rates at the zero lower bound and demonstrates that borrowing constraints help reconcile theory and evidence. According to the key insight, a binding borrowing constraint detaches money creation from credit creation. In this case, inflation ceases to be a monetary phenomenon, as in standard models, but becomes a credit phenomenon. This finding explains why expansionary monetary policies failed to produce inflation since the Great Recession.

scholarly journals Income-related inequalities in unmet dental care needs in Spain: traces left by the Great Recession

2020 ◽  
Vol 19 (1) ◽  
Author(s):  
Rosa M. Urbanos-Garrido
Keyword(s):  
Low Income ◽  
Dental Care ◽  
Great Recession ◽  
Unmet Need ◽  
Vulnerable Groups ◽  
Care Needs ◽  
Decomposition Approach ◽  
The Great Recession ◽  
Dental Care Needs ◽  
Over Time

Abstract Background Dental health is an important component of general health. Socioeconomic inequalities in unmet dental care needs have been identified in the literature, but some knowledge gaps persist. This paper tries to identify the determinants of income-related inequality in unmet need for dental care and the reasons for its recent evolution in Spain, and it inquires about the traces left by the Great Recession. Methods Data from the EU-SILC forming a decade (2007–2017) were used. Income-related inequalities for three years were measured by calculating corrected concentration indices (CCI), which were further decomposed in order to compute the contribution of different factors to inequality. An Oaxaca-type decomposition approach was also used to analyze the origin of changes over time. Men and women were analyzed separately. Results Pro-rich inequality in unmet dental care needs significantly increased over time (CCI 2007: − 0.0272 and − 0.0334 for males and females, respectively; CCI 2017: − 0.0704 and − 0.0776; p < 0.001). Inequality showed a clear “pro-cycle” pattern, growing during the Great Recession and starting to decrease just after the economic recovery began. Gender differences only were significant for 2009 (p = 0.004) and 2014 (p = 0.063). Income was the main determinant of inequality and of its variation along time -particularly for women-, followed by far by unemployment –particularly for men-; the contributions of both were mainly due to changes in elasticites. Conclusions The Great Recession left its trace in form of a higher inequality in the access to dental care. Also, unmet need for dental care, as well as its inequality, became more sensitive to the ability to pay and to unemployment along recent years. To broaden public coverage of dental care for vulnerable groups, such as low-income/unemployed people with high oral health needs, would help to prevent further growth of inequality.

scholarly journals The Well-Being Gap during the Great Recession: The Role of Growth and Institutions

2020 ◽  
Vol 12 (2) ◽  
pp. 24
Author(s):  
Marco Ciziceno ◽  
Pietro Pizzuto
Keyword(s):  
Low Income ◽  
Great Recession ◽  
Potential Role ◽  
Well Being ◽  
European Countries ◽  
Economic Downturn ◽  
Subjective Well Being ◽  
Negative Effects ◽  
The Great Recession

The purpose of this paper is to examine the well-being dynamics across European countries during the Great Recession and to investigate the potential role of the quality of formal institutions in mitigating the negative effect of the economic downturn. This study uses the club convergence methodology by Phillips and Sul (2007; 2009) to group EU-28 countries that present similar features in terms of well-being during the period 2005-2017. The study also applies probit models to investigate the potential role of several social and institutional characteristics that are supposed to affect subjective well-being levels. The results show the existence of a “well-being gap” among European countries. The economic downturn started in 2008 has impacted the perceived well-being more in low-income and low-growth countries (less developed transition and Southern countries), than in high-income and more developed transition countries. The study also shows that countries that present well-functioning institutional systems and, more in general, good institutional performances show higher life satisfaction levels and tend to be more resilient to the negative effects generated by the economic shock.

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