Claes Bäckman

This paper shows that homophily in #socialnetwork affects stock market participation. Denser, homogenous networks boost participation, especially among wealthier individuals, while social influence is more significant for lower-income groups.

Read: papers.ssrn.com/sol3/papers....

Eller hur!

Tack!

These two mechanisms have different implications for regulation, and we are hoping to explore the exact mechanism more in detail in some follow-up work.

Two broad mechanism for why amortization payments are costly are i) monthly payment targeting, where households focus on a specific monthly mortgage payment rather than minimizing the lifetime cost of the loan and ii) a desire to save in other assets.

Second, we show in the model that the amortization requirement will have a significant impact on household wealth accumulation, matching some recent empirical evidence from the Netherlands.

We use model simulations to show that introducing interest-only mortgages increase aggregate debt and lifetime interest expenses, especially if amortization payments are viewed as a cost. Importantly, this result applies to wealthy borrowers far from borrowing constraints.

Two important aggregate implications: First, financial innovation in the 1990s and early 2000s generated a wide variety of new mortgage products with lower amortization payments.

We show that households reduce their borrowing in response to higher amortization payments (see figure), which we attribute to households viewing amortization payments as a cost. We use lifecycle model to explore the mechanisms and to think about the aggregate effects.

How does the design of debt repayment schedules affect household borrowing? Many borrowers focus on the initial monthly mortgage payment rather than minimize the life-time costs of the loan, even when they could afford to do otherwise. As a result, new financial products with...

The paper studies how household borrowing responds to the amortization requirement, a Swedish macroprudential policy mandating higher repayments of mortgage debt. You can read a brief non-technical summary here: safe-frankfurt.de/news-latest/...

Beyond excited to say that our paper on amortization payments and borrowing has just been accepted at the Review of Financial Studies! Very grateful to my co-authors, Peter van Santen and Patrick Moran, and to the editor and referees who helped to significantly improve the paper.

Great thread here

Tilykke!

Thanks for sharing, looks interesting! Out of curiosity, how did you make the website?

I have moved my open textbook on inequality research to a new address:
https://maxkasy.github.io/inequalityresearch/

(The textbook has not been updated recently, but hopefully is still useful.)

It’s certainly true that theory comes after empirics in a lot of cases. I think it’s the pure scale that’s different though.

This is a really cool (and concerning) paper. Makes me if the equilibrium outcome going to be more gatekeeping and name-checking at journals?

Mortgage innovation and house price booms We study how mortgage innovation can cause a housing boom even within a robust regulatory framework and strictly enforced recourse borrowing. Specific…

Link to the paper: www.sciencedirect.com/science/arti...

In fact, there are many good reasons to believe that interest-only mortgages help stabilize consumption and housing markets, once they are available.

A final note on interpreting the results: Our study says that the **introduction** of a new mortgage product that half of Danish homeowners were using 4 years later had a large impact on house prices. This does not mean that interest-only mortgages make house prices more volatile now.

Importantly, this implies that mortgage innovation (often about the amortization payment) will impact house price dynamics. We also argue that mortgage innovation also cause house price expectations to rise, which further increases house prices.

We show that house prices rose more rapidly in areas where such products were more valuable. The basic idea is that if your house is relatively inexpensive, then amortization payment will be small, and you might not need an interest-only mortgage.

Interest-only mortgages went from 0 to 50 percent of **outstanding** mortgage debt, a remarkable transformation of the market. Danish borrowers really liked these products!

We argue that the introduction of interest-only mortgages in Denmark in 2003 led to a rapid rise in house prices in areas. These products allowed borrowers to reduce amortization payments, thereby reducing monthly payments by about 20%.

Very happy to see our paper on interest-only mortgages and house prices in the Journal of Urban Economics!

From 2003 to 2006, Danish house prices increased by 60 percent, in a robust regulatory design that limits housing speculation. This was a larger increase than in the US, Spain, or Ireland!

The greatest poet of our, or any, generation

Just a reminder that @gmcd.bsky.social and @kylefbutts.bsky.social have made an incredible public good describing how to use data.table and fixest to encourage moving from Stata to R!

stata2r.github.io

Gender norms are extremely persistent and constrain women's life opportunities, especially so in poor countries. In my Job Market Paper, I show that grassroots media are an effective policy instrument to address gender norms at scale. #EconJMP #EconSky

Full paper is here: claesbackman.github.io/Papers/Perso...

Today, we have an article in Handelsblatt about our paper on financial advice to family and friends. Giving financial advice to family and friends is risky, and we argue that this leads to generally good advice! www.handelsblatt.com/finanzen/mae...