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Regional Redistribution through the US Mortgage Market

The American economic review, 2016-10, Vol.106 (10), p.2982-3028 [Peer Reviewed Journal]

Copyright© 2016 American Economic Association ;Copyright American Economic Association Oct 2016 ;ISSN: 0002-8282 ;EISSN: 1944-7981 ;DOI: 10.1257/aer.20151052 ;CODEN: AENRAA

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Title:
Regional Redistribution through the US Mortgage Market
Author: Hurst, Erik ; Keys, Benjamin J. ; Seru, Amit ; Vavra, Joseph
Subjects: American Recovery & Reinvestment Act 2009-US ; Balance sheets ; Bankruptcy laws ; Borrowing ; Business cycles ; Collateral ; Consumption ; Default ; Economic conditions ; Economic impact ; Economic models ; Economic statistics ; Economic theory ; Economics ; Employment ; Federal Reserve monetary policy ; Government sponsored enterprises ; Housing prices ; Income redistribution ; Interest rates ; Macroeconomics ; Monetary policy ; Monetary unions ; Mortgage rates ; Mortgages ; Nonconforming loans ; Recessions ; Regions ; Risk sharing ; Studies ; United States
Is Part Of: The American economic review, 2016-10, Vol.106 (10), p.2982-3028
Description: Regional shocks are an important feature of the US economy. Households' ability to self-insure against these shocks depends on how they affect local interest rates. In the United States, most borrowing occurs through the mortgage market and is influenced by the presence of government-sponsored enterprises (GSE). We establish that despite large regional variation in predictable default risk, GSE mortgage rates for otherwise identical loans do not vary spatially. In contrast, the private market does set interest rates which vary with local risk. We use a spatial model of collateralized borrowing to show that the national interest rate policy substantially affects welfare by redistributing resources across regions.
Publisher: Nashville: American Economic Association
Language: English
Identifier: ISSN: 0002-8282
EISSN: 1944-7981
DOI: 10.1257/aer.20151052
CODEN: AENRAA
Source: ProQuest Central

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Regional Redistribution through the US Mortgage Market

Copyright© 2016 American Economic Association ;Copyright American Economic Association Oct 2016 ;ISSN: 0002-8282 ;EISSN: 1944-7981 ;DOI: 10.1257/aer.20151052 ;CODEN: AENRAA

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