How do foreclosures exacerbate housing downturns?

This article uses a structural model to show that foreclosures played a crucial role in exacerbating the recent housing bust and to analyse foreclosure mitigation policy. We consider a dynamic search model in which foreclosures freeze the market for non-foreclosures and reduce price and sales volume by eroding lender equity, destroying the credit of potential buyers, and making buyers more selective. These effects cause price-default spirals that amplify an initial shock and help the model fit both national and cross-sectional moments better than a model without foreclosure. When calibrated to the recent bust, the model reveals that the amplification generated by foreclosures is significant: ruined credit and choosey buyers account for 25.4% of the total decline in non-distressed prices and lender losses account for an additional 22.6%. For policy, we find that principal reduction is less cost-effective than lender equity injections or introducing a single seller that holds foreclosures off the market until demand rebounds. We also show that policies that slow down the pace of foreclosures can be counterproductive.Accepted manuscrip

Regulating An Experience Good In Developing Countries When Consumers Cannot Identify Producers

In developing countries, consumers can buy many goods from either the formal sector or the informal sector and choose the sector to patronize based on the product's price there and anticipated quality. We assume that firms can produce in either sector and can adjust quality at a cost. In the long run, firms produce in the sector that is more profitable. As for the consumers, we assume they cannot assess quality prior to purchase and cannot, at a reasonable cost, identify the producer of what they are purchasing. Many products (meats, fruits, vegetables, fish, grains) sold both in formal groceries and, less formally, on the street fit this description. Using this model, we investigate how a change in regulations in the formal sector affects quality, price, aggregate production and the number of firms in each sector.experience good, formal sector, informal sector, quality

Markets with untraceable goods of unknown quality: a market failure exacerbated by globalization

In markets for many fruits, vegetables, and an increasing number of imported goods, consumers cannot discern the quality of a product prior to purchase and can never identify its producer. Producing high-quality, safe goods is costly for a firm and raises the collective reputation for quality shared with its rivals. Minimum quality standards improve welfare. If consumers observe the country of origin of a product, quality, profits, and welfare increase. Exports from countries with more exporting firms are of lower quality and sell for lower prices. If one country imposes a minimum quality standard on its exports while other countries do not, consumers benefit. As for sellers, the regulation raises the profits of firms in the country with regulation and lowers the profits of firms in countries without regulation.globalization; quality; collective reputation; minimum quality standards

Markets with Untraceable Goods of Unknown Quality: A Market Failure Exacerbated by Globalization

In markets for fruits, vegetables, and many imported goods, consumers cannot discern quality prior to purchase and can never identify the producer. Producing high-quality, safe goods is costly and raises the "collective reputation" for quality shared with rival firms. Minimum quality standards imposed on all firms improve welfare. If consumers can observe the country of origin of a product, quality, profits, and welfare increase. If one country imposes a minimum quality standard on its exports, consumers benefit, the profits of firms in the country with regulation rise, and the profits of firms in countries without regulation fall.

Essays in Financial and Housing Economics

This dissertation presents four essays. The first chapter builds a real-options, term structure model of the firm incorporating stochastic volatility and endogenous default to shed new light on the value premium, financial distress, momentum, and credit spread puzzles. The paper uses recently developed methodologies based on asymptotic expansions to solve the model. The second chapter, coauthored with Adam Guren, presents a model that shows how foreclosures can exacerbate a housing bust and delay the housing market's recovery. Quantitatively, the model successfully explains aggregate and retail price declines, the foreclosure share of volume, and the number of foreclosures both nationwide and across MSAs. The third and fourth chapters, coauthored with Stephen W. Salant and Jason Winfree, discuss the economics of untraceable experience goods in a variety of settings. The third chapter drops the "small country" assumption in the trade literature on collective reputation and shows how large exporters like China can address severe problems assuring the quality of its exports. The fourth chapter demonstrates how regulations in the formal sector of developing countries can lead to a quality gap between formal and informal sector goods. It moreover investigates how changes in regulation affect quality, price, aggregate production, and the number of firms in each sector.Economic

Trajectory optimization in the presence of constraints

Thesis (M.S.)--Massachusetts Institute of Technology, Dept. of Aeronautics and Astronautics, 1989.Includes bibliographical references (leaves 113-114).by Timothy E. McQuade.M.S

Markets with untraceable goods of unknown quality: a market failure exacerbated by globalization

In markets for many fruits, vegetables, and an increasing number of imported goods, consumers cannot discern the quality of a product prior to purchase and can never identify its producer. Producing high-quality, safe goods is costly for a firm and raises the collective reputation for quality shared with its rivals. Minimum quality standards improve welfare. If consumers observe the country of origin of a product, quality, profits, and welfare increase. Exports from countries with more exporting firms are of lower quality and sell for lower prices. If one country imposes a minimum quality standard on its exports while other countries do not, consumers benefit. As for sellers, the regulation raises the profits of firms in the country with regulation and lowers the profits of firms in countries without regulation

Markets with untraceable goods of unknown quality: a market failure exacerbated by globalization

In markets for many fruits, vegetables, and an increasing number of imported goods, consumers cannot discern the quality of a product prior to purchase and can never identify its producer. Producing high-quality, safe goods is costly for a firm and raises the collective reputation for quality shared with its rivals. Minimum quality standards improve welfare. If consumers observe the country of origin of a product, quality, profits, and welfare increase. Exports from countries with more exporting firms are of lower quality and sell for lower prices. If one country imposes a minimum quality standard on its exports while other countries do not, consumers benefit. As for sellers, the regulation raises the profits of firms in the country with regulation and lowers the profits of firms in countries without regulation

Accelerated gas-liquid visible light photoredox catalysis with continuous-flow photochemical microreactors

In this protocol, we describe the construction and use of an operationally simple photochemical microreactor for gas-liquid photoredox catalysis using visible light. The general procedure includes details on how to set up the microreactor appropriately with inlets for gaseous reagents and organic starting materials, and it includes examples of how to use it to achieve continuous-flow preparation of disulfides or trifluoromethylated heterocycles and thiols. The reported photomicroreactors are modular, inexpensive and can be prepared rapidly from commercially available parts within 1 h even by nonspecialists. Interestingly, typical reaction times of gas-liquid visible light photocatalytic reactions performed in microflow are lower (in the minute range) than comparable reactions performed as a batch process (in the hour range). This can be attributed to the improved irradiation efficiency of the reaction mixture and the enhanced gas-liquid mass transfer in the segmented gas-liquid flow regime

Mortgage design in an equilibrium model of the housing market

How can mortgages be redesigned to reduce macrovolatility and default? We address this question using a quantitative equilibrium life‐cycle model. Designs with countercyclical payments outperform fixed payments. Among those, designs that front‐load payment reductions in recessions outperform those that spread relief over the full term. Front‐loading alleviates liquidity constraints when they bind most, reducing default and stimulating housing demand. To illustrate, a fixed‐rate mortgage (FRM) with an option to convert to adjustable‐rate mortgage, which front‐loads payment reductions relative to an FRM with an option to refinance underwater, reduces price and consumption declines six times as much and default three times as much.Funding Provided by NSF under grant "Mortgage Design in an Equilibrium Model of the Housing Market" (1623801 - National Science Foundation)Accepted manuscrip