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Erscheinungsjahr: 
2015
Schriftenreihe/Nr.: 
Bonn Econ Discussion Papers No. 06/2015
Verlag: 
University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn
Zusammenfassung: 
We show that the size of collateralized household debt determines an economy’s vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt levels this liquidity feedback effect is strong enough to give rise to multiplicity of house prices. In a dynamic setup, we conceptualize confidence as a realization of rationally entertainable belief-weightings of multiple future prices. This delivers debt-level-dependent bounds on the extent to which confidence may drive house prices and aggregate consumption.
Schlagwörter: 
Household debt
Consumer confidence
Collateral constraints
Multiple equilibria
JEL: 
E21
E32
D91
Dokumentart: 
Working Paper

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