Foreclosure Delay and Consumer Credit Performance

The deep housing market recession from 2008 through 2010 was characterized by a steep rise in number of foreclosures. The average length of time from onset of delinquency through the end of the foreclosure process also expanded dramatically. Although most individuals undergoing foreclosure were experiencing serious financial stress, the extended foreclosure timelines enabled them to live in their homes without making mortgage payments until the end of the foreclosure process, thus providing temporary income and liquidity benefits from lower housing costs. This paper investigates the impact of extended foreclosure timelines on borrower performance with credit card debt. Our results indicate that a longer period of nonpayment of mortgage expenses results in higher cure rates on delinquent credit cards and reduced credit card balances. Thus, foreclosure process delays may have mitigated the impact of the economic downturn on credit card default—suggesting that improvement in credit card performance during the post-crisis period would likely be slowed by the removal of the temporary liquidity benefits as foreclosures reach completion.     

Disaggregation of Local Apartment Markets by Unit Type

Recent market segmentation research has begun to delve into the issue of whether traditional property-type categories are sufficiently homogeneous to be modeled as aggregate real estate markets. This article extends the research on rental-property market segmentation by investigating the existence of apartment submarkets determined by unit type. The study finds that one-bedroom, one-bath units; two-bedroom, one-bath units; and two-bedroom, two-bath units function as distinct submarkets differentiated by property features, neighborhood location, and temporal changes in market rent.     

Banks, Payments, and Coordination

Banks are modeled as Bryant/Diamond-Dybvig "insurers" against the risk of early consumption. Consumption claims must be verified by clearing and settlement. A clearinghouse does this efficiently as long as banks are sufficiently liquid. If liquidity requirements cannot be enforced against all banks then the threat of panics is necessary to induce banks to hold sufficient liquidity. If the clearinghouse can issue emergency currency, then banks can coexist with less liquid institutions. However, if banks′ return to holding reserves is low during "normal times," then there must be times when the return to liquidity is abnormally high. We associate these episodes with the panics of the National Banking Era. Journal of Economic Literature Classification Numbers: 042, 311, 314.     

Comparative Research Productivity Measures for Economics Departments

The typical profit-maximization solution for the joint-production problem found in intermediate texts, managerial texts, and other texts concerned with optimal pricing is oversimplified and inconsistent with profit maximization, unless there is either no excess of any of the joint products or no costs associated with dumping. However, it is an inappropriate method of solution where excess does exist and the costs of dumping are explicitly recognized and, with respect to such cases, is at least nongeneral. The authors present a more realistic alternative method of solution, although more complex, as a substitute for the textbook method of solution typically offered.     

Inflation targeting and monetary policy in Canada: What is the impact on inflation uncertainty?

Inflation uncertainty has been demonstrated both theoretically and empirically to lower real output. This paper examines the impact of inflation targeting in Canada on inflation uncertainty, as well as persistence. Our results indicate that inflation targeting lowered inflation persistence, but actually increased uncertainty. Such an effect may be due to the failure of the previous formal target, the M1 money supply, to successfully combat inflation.