Collateral constraints and macroeconomic asymmetries

Luca Guerrieri and Matteo Iacoviello

Journal of Monetary Economics, 2017, vol. 90, issue C, 28-49

Abstract: Full information methods are used to estimate a nonlinear general equilibrium model where occasionally binding collateral constraints on housing wealth drive an asymmetry in the link between housing prices and economic activity. The estimated model shows that, as collateral constraints became slack during the housing boom of 2001–2006, expanding housing wealth made a small contribution to consumption growth. By contrast, the housing collapse that followed tightened the constraints and sharply exacerbated the recession of 2007–2009. The empirical relevance of this asymmetry is corroborated by evidence from state- and MSA-level data.

Keywords: Housing; Collateral constraints; Occasionally binding constraints; Nonlinear estimation of DSGE models; Great Recession (search for similar items in EconPapers)
JEL-codes: E32 E44 E47 R21 R31 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (180)

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Related works:
Working Paper: Collateral constraints and macroeconomic asymmetries (2015)
Working Paper: Collateral constraints and macroeconomic asymmetries (2013)
Working Paper: Collateral Constraints and Macroeconomic Asymmetries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:90:y:2017:i:c:p:28-49

DOI: 10.1016/j.jmoneco.2017.06.004

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