Abstract
In this study, we investigate the dynamic relation among mortgage default rates, housing prices, unemployment rate, the loan-to-value ratio, the debt-to-income ratio, and monetary (interest rate) policy in the United States before and during the mortgage crisis associated with the recent global financial crisis. We find that the housing market, macroeconomic, and borrower characteristic variables are cointegrated before the financial crisis, but this relation disappears during the crisis, indicating that the housing market may become segmented during severe crises. We conclude that traditional monetary policy actions, such as adjusting interest rates, may not be effective in alleviating mortgage defaults during a mortgage crisis. In the short term, monetary policy actions can help to reduce unemployment caused by a weak housing market, but the direct impact on the housing market itself is likely insignificant.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
