EconStor >
Verein für Socialpolitik >
Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft - Lektionen aus der Krise >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/48726
  
Title:How Did the US Housing Slump Begin? The Role of the 2005 Bankruptcy Reform PDF Logo
Authors:von Lilienfeld-Toal, Ulf
Mookherjee, Dilip
Issue Date:2011
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft: Lektionen aus der Krise - Session: Financial Crises A10-V3
Abstract:Most analyses of the recent financial crisis in the US focus on the consequences of the dramatic slump in housing prices that started in the mid-2000s, which led to rising mortgage defaults, shrinking home equity credit and liquidity in the banking system. Yet these accounts do not explain what caused the reversal of housing price growth in the first place. This paper argues that the passage of the 2005 Bankruptcy Reform Act (BAPCPA) contributed significantly to the reversal. The reform generated negative wealth effects for a category of homeowners, lowering prices of their homes, which spread via a process of contagion to the prices of other homes. Evidence consistent with this hypothesis is provided: changes in housing prices and mortgage interest rates at the MSA level following the reform were significantly correlated with BAPCPA-exposure. The results are robust to controls for the size of the pre-2005 price growth, local unemployment rates, rates of new home construction and home vacancies, apart from MSA, house and year dummies.
JEL:G01
K35
R30
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft - Lektionen aus der Krise

Files in This Item:
File Description SizeFormat
VfS_2011_pid_717.pdf325.33 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/48726

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.