La Cava, Giancarlo
(2013)
Credit supply shocks in the US housing market.
PhD thesis, London School of Economics and Political Science.
Abstract
The aim of my thesis is to study the impact of three different types of credit supply shocks
on the US economy during the recent boom-bust cycle. I apply rigourous identification
strategies using a comprehensive mortgage loan-application level dataset that spans two
decades to identify the causal effect of each shock on the US housing market { the market
at the epicentre of the recent global financial crisis.
The first chapter examines how shocks to the geographic distance between borrowers and
lenders affected the quality of loans originated by US banks. I show that US banks that
originated loans at relatively long distances recorded relatively high shares of delinquent
mortgages, which suggests that geographic distance hampers a bank's ability to screen bor-
rowers.
The second chapter assesses how the supply of mortgage credit was affected by the closure
of the private-label securitisation market in 2007. By impairing lender financing conditions,
I demonstrate that the shock to the securitisation market caused US mortgage lenders to
curtail new lending and that this adversely affected the aggregate level of new mortgage
credit.
The third chapter explores whether shocks to bank lending standards affect household
borrowing and spending. I show that the introduction of US state anti-predatory lending
laws, by tightening lending standards, caused a decline in the level of household mortgage
credit, although this had little subsequent impact on household spending.
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