Search results for " borrowing constraints"

Labor Market Search, Housing Prices and Borrowing Constraints.

2010

Mortgage market deregulation in the early 1980s coincided in time with a sharp break in the cyclical behavior of many variables related to housing and to the labor market. This paper analyses the joint dynamics of labor market variables, output and housing prices in a search model with efficient bargaining and financial frictions. In a setting of household heterogeneity, only mortgaged-backed loans are available for impatient households, whose borrowing cannot exceed a proportion of the expected value of their real estate holdings. This feature of the credit market, together with search and matching frictions in the labor market, establish a strong link between credit constraints and consum…