1. Home Purchases with and without Mortgage Credits: Implications for Portfolio Investment, with A. Gunes (2024) (submitted)
This paper is an empirical assessment of the effects of home purchases on portfolio allocation at the time of purchase as buying a home is one of the largest purchasing decisions over the lifetime of a typical household in the US. Using the Panel Study of Income Dynamics data, the results indicate significant differentiation between portfolio behaviours of mortgage purchasers and non-mortgage purchasers at the time of purchasing decision. While mortgage purchasers are more inclined to save for the down payment in the form of riskless assets, non-mortgage purchasers who are planning to purchase a home without any mortgage loans invest mostly in the risky assets. The results imply that an optimal portfolio allocation for mortgage purchasers could help them make the purchase earlier or buy larger houses with the same duration of the saving.
2. Debt Payments and Real Economic Activity over Short and Medium Run with M. Kilinc, (2022) (submitted)
In this paper, we investigate the role of household debt service burden on the short and medium run economic growth of a sample of advanced countries. Using debt service ratio data provided by the Bank for International Settlements, we find that debt service burden depresses economic growth over both short and medium run. This finding is in contrast to the effect of household debt level, which boosts economic growth in the short run while depressing in the long run as in Mian et al. (2017). We further find the same protracted effect of debt service burden on unemployment and household consumption. Therefore, our paper uncovers a new transmission channel of the debt markets (i.e., debt service channel) on economic growth, and shows that this channel is quantitatively much stronger than the household debt level channel. When faced with a rise in the debt service burden, households need to adjust other decision variables in order to satisfy their budget constraints. The present results indicate that they decrease their consumption levels significantly, with adverse effects on economic output and employment.
3. Exchange Rate Pass-through to House Prices with M. Kilinç (2024) (submitted)
This paper examines the role of exchange rates in explaining house prices in a sample of emerging market economies. We use a panel VAR methodology to understand economic dynamics in response to exchange rate shocks. The impulse responses show that when the local currency depreciates unexpectedly, GDP is adversely affected and consumer prices rise sharply in the following quarters. Monetary policy responds by raising interest rates. House prices also rise, but their dynamics are very different from those of consumer prices. The house price response peaks in about a year and then follows a slow downward process. In contrast, consumer price response is larger in magnitude but shorter in duration than the house price response. Moreover, we find that the exchange rate pass-through level reaches to about 5% in one year, almost 10% in the second year and about 17% in five years. In addition, the cross-country analysis documents significant pass-through heterogeneities across emerging markets. Overall, the empirical analysis provides supportive evidence for the important role of exchange rates in explaining house prices in emerging economies.
4. Pass-through of Different Shocks into Domestic Prices with N. Solakoglu, S. Babuscu, and A. Hazar (2024)
This paper studies pass-through of oil prices, imported prices, and exchange rate shocks into producer and consumer prices of Turkiye.