Credit expansion fuels housing speculation

Friday, Aug 24, 2018

A new working paper by JRCPPF Director Atif Mian and Amir Sufi sheds light on how credit booms affect housing markets. Economics theory and common sense have long supported the idea that easy availability of credit allows optimists to make more aggressive bets. In their paper, “Credit Supply and Housing Speculation,” Mian and Sufi use a natural experimentthe sudden acceleration of the private label mortgage securitization (PLS) market in the late summer of 2003—to test the theory. A summary of the paper is available on the VoxEU website.