Shihan Xie 谢诗涵

Extreme Weather and Low-Income Household Finance: Evidence from Payday Loans [Apr 2024]

with Victoria Wenxin Xie, and Xu Zhang

Media coverage: the Guardian, Politico Pro

Abstract: This paper explores the impact of extreme weather exposures on the financial outcomes of low-income households. Using a novel dataset comprising individual-level payday loan applications and loan-level information,  we find that both extreme heat and cold days lead to surges in payday loan demand. Extra extreme heat days result in an increase in delinquency and default rates and a reduction of total credit issued, indicating a contraction in loan supply. The effects are especially noticeable for online payday loans. Our findings highlight the heightened financial vulnerability of low-income households to environmental shocks and underscore the need for targeted policies.

Macroprudential Policy and Housing Market Expectations [May 2024]

with Pei Kuang, Kaushik Mitra, and Li Tang

Abstract: Using a large-scale online survey experiment, we study the effects of changes in three borrower-based macroprudential policies: residential loan-to-value (LTV), debt-to-income, and buy-to-let LTV ratio, on British consumers' housing market expectations. Policy tightenings lead to lower house price expectations, more negative sentiments about housing transactions, and worsened affordability evaluations; policy loosenings cause opposite effects. The residential LTV ratio is the most effective tool. Changes in residential LTV ratio have larger impacts on house price expectations in "hot" markets. This finding is reconciled in a model featuring a feedback loop between house prices, credit, and price expectations.  

Effects of Monetary Policy on Household Expectations: The Role of Homeownership

with Hie Joo Ahn and Choongryul Yang. Journal of Monetary Economics, forthcoming

Abstract: We study the role of homeownership in the effectiveness of monetary policy on households' expectations based on individual-level microdata in the U.S. We find that homeowners lower their near-term inflation expectations and optimism about the labor market outlook in response to a rise in mortgage rates, while renters are less likely to do so. We further show that forward guidance shocks lead to similar differences between homeowners and renters. Our results suggest that homeowners pay attention to news on interest rates and adjust their expectations accordingly in a manner consistent with the intended effect of monetary policy. We characterize this empirical finding with a rational inattention model where mortgage payments create an incentive for homeowners to acquire information on monetary policy, unlike renters. This housing-driven endogenous attentiveness is the key mechanism behind the compelling empirical link among homeownership, attention, and the transmission of monetary policy.

An Estimated Model of Household Inflation Expectations: Information Frictions and Implications

Review of Economics and Statistics, forthcoming

Abstract: This paper proposes and estimates a dynamic model of household inflation expectations with information frictions and time-varying parameters, where households use a Bayesian learning model to form and update inflation expectations. The model decomposes households' inflation expectation formation process into a learning component, a noisy signal component, and a measurement component. Model-implied household inflation expectations provide a robust fit for the expectation-augmented Phillips curve. As a result of time-varying inflation dynamics, households' attention to inflation is endogenous to its volatility. This insight offers explanations for the anchoring of inflation expectations during the Great Moderation.

Monetary Policy Shocks and Local Housing Prices

accepted at International Journal of Central Banking

Abstract: This paper studies the channels by which monetary policy shocks affect local housing prices. It first documents there is a sluggish response of housing prices, suggesting that informational frictions may be potentially important. It then develops a structural model of housing prices with information frictions, and exploits variations in housing prices across metropolitan statistical areas to estimate it. The important finding is that although households are well-informed about local demand, they are ill-informed about how monetary policy affects the local housing market. A counterfactual experiment using the estimated model implies that deviations from the Taylor rule in the early 2000s contributed to about two-fifths of the subsequent housing boom.