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Stafford says too early to say whether stock market declines will curtail Americans' spending

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Call for papers: Conference on Integrating Genetics and the Social Sciences, Oct 21-22, 2016, CU-Boulder

PRB training program in policy communication for pre-docs. Application deadline, 2.28.2016

Call for proposals: PSID small grants for research on life course impacts on later life wellbeing

PSC News, fall 2015 now available

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Home is where the equity is: Mortgage refinancing and household consumption

Publication Abstract

Hurst, E., and Frank P. Stafford. 2004. "Home is where the equity is: Mortgage refinancing and household consumption." Journal of Money Credit and Banking, 36(6): 985-1014.

Applying a permanent income model with exogenous liquidity constraints and mortgage behavior, household refinancing when mortgage interest rates are historically high and rising, a persistent empirical puzzle, is explained. Using data from the Panel Study of Income Dynamics, households experiencing an unemployment shock and having limited initial liquid assets to draw upon are shown to have been 25% more likely to refinance, 1991-94. On average, such liquidity-constrained households converted over two-thirds of every dollar of equity they removed into current consumption as mortgage rates plummeted, 1991-94, producing an estimated expenditure stimulus of at least $28 billion.

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