Adam Smith Business School

Dr Karin Kinnerud, Norwegian Business School

"Down-payment requirements: Implications for portfolio choice and consumption."
Thursday, 30 November. 3 pm
Room 355 Gilbert Scott Building

Abstract

This paper studies how down-payment requirements for house purchases affect households ’ saving and housing decisions and the implications of and the implications of macroeconomic policy. Using a quantitative model of the U.S. economy, we find that households only post their homeownership with the government's payment conditions, but they cannot leave the house. We show analytically that these results under standard assumptions for households ’ earnings and preferences. The changes to saving and portfolio choices affected the distribution of liquidity-constrained households, which in turn impacted aggregate response policy. Specifically, the cash-flow channel of monetary policy is reduced, and it becomes increasingly important to direct fiscal transfers at low-income households to achieve the largest consumption response. We also find that a stricter down-payment requirement is associated with substantial welfare losses, especially for high-income households.

Bio

Karin Kinnerud is Assistant Professor of economics at BI Norwegian Business School. Her research focuses on macroeconomics, housing, household finance, and monetary policy. Karin earned her PhD in 2020 from the Institute for International Economic Studies at Stockholm University and holds a MSc in quantitative financial economics from Oklahoma State University

---

For further information, please contact business-school-research@glasgow.ac.uk

We foster a positive and productive environment for seminars through our Code of conduct.

First published: 6 November 2023