TY  - RPRT
        AU  - Hintermaier, Thomas
AU  - Koeniger, Winfried
        TI  - Household Debt and Crises of Confidence
        PY  - 2015/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 9409
        UR  - https://www.iza.org/publications/dp9409
        AB  - We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt levels this liquidity feedback effect is strong enough to give rise to multiplicity of house prices. In a dynamic setup, we conceptualize confidence as a realization of rationally entertainable belief-weightings of multiple future prices. This delivers debt-level-dependent bounds on the extent to which confidence may drive house prices and aggregate consumption.
        KW  - multiple equilibria
KW  - collateral constraints
KW  - consumer confidence
KW  - household debt
        ER  -