Failure to launch : housing, debt overhang, and the inflation option
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- dc.contributor.author Hedlund, Aaronca
- dc.date.accessioned 2018-09-18T14:19:09Z
- dc.date.available 2018-09-18T14:19:09Z
- dc.date.issued 2018-04
- dc.description.abstract Can inflating away nominal mortgage liabilities effectively combat recessions? I address this question using a model of illiquid housing, endogenous credit supply, and equilibrium default. I show that, in an ordinary recession, temporarily raising the inflation target has only modest or even counterproductive effects. However, during episodes like the Great Recession, inflation effectively boosts house prices, consumption, and dramatically cuts foreclosures, but only when fixed rate mortgages are the dominant instrument. The quantitative implications of inflation also vary if other nominal rigidities or demand externalities are present. In the cross section, inflation delivers especially large gains to highly leveraged homeowners.ca
- dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
- dc.format.mimetype application/pdfca
- dc.identifier.uri http://hdl.handle.net/10230/35456
- dc.language.iso engca
- dc.relation.ispartofseries ADEMU Working Paper Series;98
- dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
- dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.ca
- dc.rights.accessRights info:eu-repo/semantics/openAccessca
- dc.rights.uri https://creativecommons.org/licenses/by/4.0/ca
- dc.subject.other Housingca
- dc.subject.other Liquidityca
- dc.subject.other Mortgage debtca
- dc.subject.other Foreclosureca
- dc.subject.other Inflationca
- dc.title Failure to launch : housing, debt overhang, and the inflation optionca
- dc.type info:eu-repo/semantics/workingPaperca