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- W2892016777 abstract "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. (JEL D14, E31, E32, E52, G21, R31)" @default.
- W2892016777 created "2018-09-27" @default.
- W2892016777 creator A5015620609 @default.
- W2892016777 date "2019-04-01" @default.
- W2892016777 modified "2023-09-26" @default.
- W2892016777 title "Failure to Launch: Housing, Debt Overhang, and the Inflation Option" @default.
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- W2892016777 doi "https://doi.org/10.1257/mac.20160371" @default.
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