Failure to Launch: Housing, Debt Overhang, and the Inflation Option

• 成果类型: Article
• 署名作者: Hedilund, Aaron
• 署名单位: University of Missouri System; University of Missouri Columbia
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20160371
• 发表日期: 2019
• 页码: 228-274
• 关键词: cyclical dynamics; consumption; mortgages; deflation; earnings; WEALTH; rates

摘要

Can inflating away nominal mortgage liabilities effectively combat recessions? I address this question using a model of illiquid housing, endogenous credit supply, and equilibrium default. I show that, in an ordinary recession, temporarily raising the inflation target has only modest or even counterproductive effects. However, during episodes like the Great Recession, inflation effectively boosts house prices, consumption, and dramatically cuts foreclosures, but only when fixed-rate mortgages are the dominant instrument. The quantitative implications of inflation also vary if other nominal rigidities or demand externalities are present. In the cross section, inflation delivers especially large gains to highly leveraged homeowners.