Stern School of Business
New York University
44 West 4th Street
New York, NY 10012
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
NBER Working Papers and Publications
|November 2017||House Price Beliefs And Mortgage Leverage Choice|
with Michael Bailey, Theresa Kuchler, Johannes Stroebel: w24091
We study the relationship between homebuyers' beliefs about future house price changes and their mortgage leverage choices. From a theoretical perspective, whether more pessimistic homebuyers choose more or less leverage is ambiguous and depends on their willingness to reduce the size of their housing investment. When households primarily maximize the levered return of their property investment, more pessimistic homebuyers reduce their leverage to purchase smaller houses. On the other hand, when considerations such as family size pin down the desired property size, pessimistic homebuyers reduce their financial exposure to the housing market by making smaller downpayments to buy similarly-sized homes. To determine which scenario better describes the data, we empirically investigate the cros...
|July 2016||Pecuniary Externalities in Economies with Financial Frictions|
with Anton Korinek: w22444
This paper characterizes the efficiency properties of competitive economies with financial constraints, in which phenomena such as fire sales and financial amplification may arise. We show that financial constraints lead to two distinct types of pecuniary externalities: distributive externalities that arise from incomplete insurance markets and collateral externalities that arise from price-dependent financial constraints. For both types of externalities, we identify three sufficient statistics that determine optimal taxes on financing and investment decisions to implement constrained efficient allocations. We also show that fire sales and financial amplification are neither necessary nor sufficient to generate inefficient pecuniary externalities. We demonstrate how to employ our framework...