NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

James Cloyne

Department of Economics
University of California, Davis
One Shields Avenue
Davis, CA 95616

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NBER Program Affiliations: ME
NBER Affiliation: Faculty Research Fellow

NBER Working Papers and Publications

September 2017The Effect of House Prices on Household Borrowing: A New Approach
with Kilian Huber, Ethan Ilzetzki, Henrik Kleven: w23861
We investigate the effect of house prices on household borrowing using administrative mortgage data from the UK and a new empirical approach. The data contain household-level information on house prices and borrowing in a panel of homeowners, who refinance at regular and quasi-exogenous intervals. The data and setting allow us to develop an empirical approach that exploits house price variation coming from idiosyncratic and exogenous timing of refinance events around the Great Recession. We present two main results. First, there is a clear and robust effect of house prices on borrowing, but the responsiveness is smaller than recent US estimates. Second, the effect of house prices on borrowing can be explained largely by collateral effects. We study the collateral channel in two ways: throu...
 
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