Title
Financial Crisis and Credit Crunch in the Housing Market
Document Type
Article
Publication Date
8-2014
Publication Source
Journal of Real Estate Finance and Economics
Abstract
We investigate the recent financial crisis with an emphasis on the interlock among housing, mortgage, and credit markets. Following Geanakoplos (Econometric Society Monographs 2:170–205, 2003, 2010), we develop a model in which both prices of the mortgage and its collateral are simultaneously and endogenously determined. Our empirical tests confirm the model’s prediction that an adverse change in the risk free rate or the loan recovery rate can trigger the financial crisis as we observed. Finally, we discuss how the pro-cyclical leveraging practice by financial intermediaries can magnify their losses in mortgage-related assets and consequently cause significant contraction in the balance sheets of these firms.
Inclusive pages
256–276
ISBN/ISSN
0895-5638
Copyright
Copyright © 2014, Springer
Publisher
Springer
Volume
49
Peer Reviewed
yes
Issue
2
eCommons Citation
Wang, Fukuo Albert and Zhang, Ting, "Financial Crisis and Credit Crunch in the Housing Market" (2014). Economics and Finance Faculty Publications. 41.
https://ecommons.udayton.edu/eco_fac_pub/41
COinS
Comments
Permission documentation is on file.