Results

Blog

Bruegel:

Pitfalls to avoid as the EU ramps up defence investment

The European Union's push to rearm in the face of growing external threats and the increasing disengagement of the United States has, so far, been primarily a push to spend more on defence and to find ways to facilitate ...Read more...

Journal article

The Economic Journal:

Judge dread: Court severity, repossession risk and demand in mortgage and housing markets

We study the impact of borrower protection on mortgage and housing demand using variation in the likelihood that houses are repossessed coming from heterogeneity in preferences of local judges. We develop a framework tha...Read more...

Blog

VOX EU:

The housing consumption channel of mortgage demand

Many housing markets have experienced a dramatic rise in house prices and mortgage debt over recent decades that has outpaced average income growth. Increased wealth and increased collateral values have been cited as pos...Read more...

CEP discussion paper

Housing-consumption channel of mortgage demand

We quantify the housing-consumption channel in mortgage demand according to which households borrow more following house-price increases since housing and non-housing consumption are imperfect substitutes. To identify th...Read more...

Journal article

American Economic Journal: Applied Economics:

Measuring absolute income mobility: lessons from North America and Europe

We use linked parent-child administrative data for five countries in North America and Europe, as well as detailed survey data for two more, to investigate methodological challenges in the estimation of absolute income m...Read more...

CEP discussion paper

The signaling value of legal form in debt financing

We examine if a startup's legal form choice is used as a signal by credit providers to infer its risk to default on a loan. We propose that choosing a legal form with low minimum capital requirements signals higher defau...Read more...

Blog

LSE USA Politics and Policy:

Long Read: Economics experts agree that a US debt default would do substantial damage to financial markets

In January, the US federal government reached the debt ceiling previously set by Congress, and is now using extraordinary measures to meet its public spending obligations. The Initiative on Global Markets Forum at the Un...Read more...

Blog

Harvard Business Review:

The UK economic crisis might not be a one-off

Markets have reacted poorly to the UK government's new "mini-budget" combining energy price caps with tax cuts for the well off. The government's search for a quick fix to economic growth is a mistake. In fact, restartin...Read more...

CEP discussion paper

Judge dread: court severity, repossession risk and demand in mortgage and housing markets

We study the impact of borrower protection on mortgage and housing demand. We focus on variation in the likelihood that a house is repossessed - conditional on the mortgage being in arrears and taken to court - coming fr...Read more...

CEP discussion paper

Affordability, financial innovation and the start of the housing boom

At their peak in 2005, roughly 60 percent of all purchase mortgage loans originated in the United States contained at least one non-traditional feature. These features, which allowed borrowers easier access to credit thr...Read more...

Journal article

Journal of the European Economic Association:

The limits of political compromise: debt ceilings and political turnover

We study the desirability of limits on the public debt and of political turnover in an economy where incumbents have an incentive to set public expenditures above the socially optimal level due to rent-seeking motives. P...Read more...

Journal article

Journal of Urban Economics:

Mortgage debt and entrepreneurship

We study the link between mortgage debt and entrepreneurship using a model of occupational choice and housing tenure in a setting where loans are recourse?like in the UK and several US states. Our model shows that as lon...Read more...

CentrePiece article

Superstar houses and the American mortgage frenzy

Clement Bellet shows how visible wealth inequality fuelled the US mortgage boom that preceded the financial crisis....Read more...

CEP discussion paper

The paradox of the Joneses: superstar houses and mortgage frenzy in suburban America

Despite a major upscaling of suburban houses over the last decades, house satisfaction has remained steady in the United States. I show that upward comparison in size can explain this paradox, as top housing size mirrore...Read more...

Journal article

American Economic Review:

The sovereign-bank diabolic loop and esbies

We propose a simple model of the sovereign-bank diabolic loop, and establish four results. First, the diabolic loop can be avoided by restricting banks' domestic sovereign exposures relative to their equity. Second, equi...Read more...

CEP report

Why Governments Won't Invest

The UK Government is currently exerting a sharp and tightening squeeze on public investment at a time when borrowing for public investment has never, historically, been cheaper with interest rates close to zero in real t...Read more...

CEP discussion paper

The sovereign-bank diabolic loop and ESBies

We propose a simple model of the sovereign-bank diabolic loop, and establish four results. First, the diabolic loop can be avoided by restricting banks domestic sovereign exposures relative to their equity. Second, equit...Read more...

CEP discussion paper

Political competition and the limits of political compromise

We consider an economy where competing political parties alternate in office. Due to rent-seeking motives, incumbents have an incentive to set public expenditures above the socially optimum level. Parties cannot commit t...Read more...

CEP US election analysis

Healthcare Reform: The US Policy Debate

The ability of the next US president to rein in spending on healthcare and improve the productivity of the healthcare system is largely going to determine the country?s fiscal future. That is one of the conclusions of th...Read more...

CEP US election analysis

Recession and Recovery: The US Policy Debate on Taxes, Spending and Public Debt

The US economy is still suffering from its most severe recession in seven decades. In the first of a series of US Election Analyses, Ethan Ilzetzki covers the key issue of taxes, spending and public debt, a major point o...Read more...

CEP discussion paper

The German Transfer Problem, 1920-1933: A Sovereign Debt Perspective

The severity of the Great Depression in Germany has sometimes been blamed on reparations in simplistic fashion. Alternative interpretations relied on American capital exports, the demise of the Gold Standard, or on malfu...Read more...

CEP report

The political economy of the Greek debt crisis: a tale of two bailouts

We review the events that led to the May 2010 and July 2011 bailout agreements. We interpret the bailouts as outcomes of political-economy equilibria. We argue that the second bailout was not on the Pareto frontier and s...Read more...

CEP discussion paper

In Search of a Theory of Debt Management

A growing literature integrates debt management into models of optimal fiscal policy. One promising theory argues the composition of government debt should be chosen so that fluctuations in its market value offsets chang...Read more...

SERC/Urban and Spatial Programme Discussion Paper

The Mortgage Interest Deduction and its Impact on Homeownership Decisions

This paper examines the impact of the combined U.S. state and federal mortgage interest deduction (MID) on homeownership attainment, using data from 1984 to 2007 and exploiting variation in the subsidy across states, ove...Read more...

SERC/Urban and Spatial Programme Discussion Paper

Modelling and Forecasting UK Mortgage Arrears and Possessions

This paper presents new models for aggregate UK data on mortgage possessions (foreclosures) and mortgage arrears (payment delinquencies). The innovations include the treatment of difficult to observe variations in loan q...Read more...

CEP discussion paper

US Real Interest Rates and Default Risk in Emerging Economies

We empirically analyse the appropriateness of indexing emerging market sovereign debt to US real interest rates. We find that policy-induced exogenous increases in US rates raise default risk in emerging market economies...Read more...

CEP discussion paper

Optimal External Debt and Default

This paper analyses whether sovereign default episodes can be seen as contingencies of optimal international lending contracts. The model considers a small open economy with capital accumulation and without commitment to...Read more...

CEP discussion paper

Do Workers' Remittances Reduce the Probability of Current Account Reversals?

The paper combines the literature on financial crises in emerging markets and developing economies with that on international migrations by investigating whether the increasingly large flows of workers? remittances can h...Read more...

CEP discussion paper

Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries

We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term interest rates. In simple static specifications, a one-percentage-point increase in the pr...Read more...