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Credit Supply and the Housing Boom

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Abstract
There is no consensus among economists as to what drove the rise of U.S. house prices and household debt in the period leading up to the recent financial crisis. In this post, we argue that the fundamental factor behind that boom was an increase in the supply of mortgage credit, which was brought about by securitization and shadow banking, along with a surge in capital inflows from abroad. This argument is based on the interpretation of four macroeconomic developments between 2000 and 2006 provided by a general equilibrium model of housing and credit.

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  • Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2015. "Credit Supply and the Housing Boom," Liberty Street Economics 20150420, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87026
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    More about this item

    Keywords

    Interest rates; Macroprudential policy; Mortgages; Leverage restrictions; Household debt;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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