Houses as ATMs: Mortgage Refinancing and Macroeconomic Uncertainty
Name
SSRN-id2024392.pdf
Description
Submitted version
Size
1 MB
Format
Adobe PDF
Checksum (MD5)
15aa1d90a4639962283103623cb6975e
Author(s)
Chen, Hui
Date Issued
October 2019
Journal
The Journal of Finance
Publisher
Wiley
Citation
Chen, Hui et al. “Houses as ATMs: Mortgage Refinancing and Macroeconomic Uncertainty.” The Journal of Finance, 75, 1 (October 2019): 323-375 © 2019 The Author(s)
Version
Original manuscript
Abstract
Mortgage refinancing activity associated with extraction of home equity contains a strongly countercyclical component consistent with household demand for liquidity. We estimate a structural model of liquidity management featuring countercyclical idiosyncratic labor income uncertainty, long- and short-term mortgages, and realistic borrowing constraints. We empirically evaluate its predictions for households' choices of leverage, liquid assets, and mortgage refinancing using microlevel data. Taking the observed historical paths of house prices, aggregate income, and interest rates as given, the model accounts for many salient features in the evolution of balance sheets and consumption in the cross-section of households over 2001 to 2012.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
10.1111/JOFI.12842
