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Heterogeneous Mortgage Markets: Implications for Business Cycles and Welfare in the EMU
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Johannes Gareis
Published/Copyright:
November 30, 2019
Abstract
This paper evaluates business cycle effects of asymmetric cross-country mortgage market developments in a monetary union. By employing a two-country New Keynesian DSGE model with collateral constraints tied to housing values, we show that a change in institutional characteristics of mortgage markets, such as the loan-to-value (LTV) ratio, is an important driver of asymmetric developments in housing markets and economic activity. Our analysis suggests that the home country where credit standards are lax booms, while the rest of European Monetary Union faces a negative output gap. Overall welfare is lower if LTV ratios are higher.
Published Online: 2019-11-30
Published in Print: 2017-05-01
© 2019 by Walter de Gruyter Berlin/Boston
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Articles in the same Issue
- Heterogeneous Mortgage Markets: Implications for Business Cycles and Welfare in the EMU
- The Spending Multiplier in the Medium Run
- Population and Economic Growth Under Different Growth Engines
- The Residency Discount for Rents in Germany and the Tenancy Law Reform Act 2001: Evidence from Quantile Regressions
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