TY - UNPB

T1 - Liquidity Constraints and the Centralized Home Mortgage Policy in China

AU - Gao, Cixiu

PY - 2017

Y1 - 2017

N2 - This paper investigates China's centralized mortgage policy in general, and evaluates the policy change in 2011: the minimum down payment was dramatically raised to 60% of the home price. Using our previously developed structural model, we recover the unobserved liquidity wealth levels of individual borrowers. We provide quantitative evidence for the doubtful efficacy of the 2011 raise in the minimum down payment: it hurts the moderately-wealthy individuals, leaving them to struggle with high default risks, but doing little to prevent the rich from entering the market.

AB - This paper investigates China's centralized mortgage policy in general, and evaluates the policy change in 2011: the minimum down payment was dramatically raised to 60% of the home price. Using our previously developed structural model, we recover the unobserved liquidity wealth levels of individual borrowers. We provide quantitative evidence for the doubtful efficacy of the 2011 raise in the minimum down payment: it hurts the moderately-wealthy individuals, leaving them to struggle with high default risks, but doing little to prevent the rich from entering the market.

KW - Faculty of Social Sciences

KW - Housing mortgage

KW - Default

KW - Liquidity constraints

KW - China

KW - Structural modeling

KW - C54

KW - D82

KW - G21

M3 - Working paper

BT - Liquidity Constraints and the Centralized Home Mortgage Policy in China

ER -