The Financial Economics of Real Estate Markets and Regulation

The contemporary literature on real estate markets suggests that housing policies play a crucial role in achieving economic and financial stability and poorly designed policies can trigger economic and financial crisis. Our research group contributes to this debate by studying how financial and legal innovations affect housing markets, securitisation and the real economy. To answer these research questions, the research group generates a comprehensive European House Price Index for real estate rental and purchase markets in the European Union using web crawling and text mining techniques.

First, we aim to document how financial and legal frameworks affect risk transfer behaviour of financial institutions in housing markets through securitisation. For example, one of our research projects discusses how foreclosure laws and mortgage pricing policies should be designed to mitigate moral hazard of lenders and borrowers in mortgage markets.

The second line of research aims to establish evidence of how financial regulation contributes to securitisation booms which are considered to be at the root of the recent booms and busts cycles in housing markets. Specifically, we shed light on how banking deregulation and financial development increase the probability of a bank operating an originate-to-distribute model in the lead up to the recent financial crisis.

Finally, our research aims to expand the understanding of the role of financial innovation in lender-borrower relationships, and its implications for the real economy.

Research Cluster
Financial Stability and Regulation

Your contact

Professor Huyen Nguyen, PhD
Professor Huyen Nguyen, PhD
Mitglied - Department Financial Markets
Send Message +49 345 7753-756 Personal page

Refereed Publications


To Securitize or To Price Credit Risk?

Danny McGowan Huyen Nguyen

in: Journal of Financial and Quantitative Analysis, forthcoming


Do lenders securitize or price loans in response to credit risk? Exploiting exogenous variation in regional credit risk due to foreclosure law differences along US state borders, we find that lenders securitize mortgages that are eligible for sale to the Government Sponsored Enterprises (GSEs) rather than price regional credit risk. For non-GSE-eligible mortgages with no GSE buyback provision, lenders increase interest rates as they are unable to shift credit risk to loan purchasers. The results inform the debate surrounding the GSEs' buyback provisions, the constant interest rate policy, and show that underpricing regional credit risk increases the GSEs' debt holdings. 

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Income Inequality and Minority Labor Market Dynamics: Medium Term Effects from the Great Recession

Salvador Contreras Amit Ghosh Iftekhar Hasan

in: Economics Letters, February 2021


Using a difference-in-differences framework we evaluate the effect that exposure to a bank failure in the Great Recession period had on income inequality. We find that it led to a 1% higher Gini, relative rise of 38 cents for high earners, and 7% decline for lowest earners in treated MSAs. Moreover, we show that blacks saw a decline of 10.2%, Hispanics 9.8%, and whites 5.1% in income. Low income blacks and Hispanics drove much of the effect on inequality.

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Local Banks as Difficult-to-replace SME Lenders: Evidence from Bank Corrective Programs

Iftekhar Hasan Krzysztof Jackowicz Robert Jagiełło Oskar Kowalewski Łukasz Kozłowski

in: Journal of Banking and Finance, February 2021


In this study, we assess capabilities of different types of banks to cater to the financial needs of small and medium-sized enterprises (SMEs). Using a comprehensive dataset from an emerging economy, including the information on local banks’ corrective programs, we find that local banks remain difficult-to-replace lenders for SMEs. We show that presence of healthy local banks in an SME's vicinity immunizes the SME against the deterioration of access to bank financing linked to other local banks’ corrective programs. In contrast, large banks are unable to replace the lost lending from local competitors under corrective programs.

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Is Social Capital Associated with Corporate Innovation? Evidence from Publicly Listed Firms in the U.S.

Iftekhar Hasan Chun-Keung (Stan) Hoi Qiang Wu Hao Zhang

in: Journal of Corporate Finance, June 2020


We find that social capital in U.S. counties, as captured by strength of social norms and density of social networks, is positively associated with innovation of firms headquartered in the county, as captured by patents and citations. This relation is robust in fixed-effect regressions, instrumental variable regressions with a Bartik instrument, propensity score matching regressions, and a difference-in-differences design that isolates the effects of over time variations in social capital due to corporate headquarter relocations. Strength of social norms plays a more dominant role than density of social networks in producing these empirical regularities. Cross-sectional evidence indicates the prominence of the contracting channel through which social capital relates to innovation. Additionally, we find that social capital is also positively associated with trademarks and effectiveness of corporate R&D expenditures.

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Profit Shifting and Tax‐rate Uncertainty

Manthos D. Delis Iftekhar Hasan Panagiotis I. Karavitis

in: Journal of Business Finance and Accounting, 5-6 2020


Using firm‐level data for 1,084 parent firms in 24 countries and for 9,497 subsidiaries in 54 countries, we show that tax‐motivated profit shifting is larger among subsidiaries in countries that have stable corporate tax rates over time. Our findings further suggest that firms move away from transfer pricing and toward intragroup debt shifting that has lower adjustment costs. Our results are robust to several identification methods and respecifications, and they highlight the important role of tax‐rate uncertainty in the profit‐shifting decision while pointing to an adjustment away from more costly transfer pricing and toward debt shifting.

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Working Papers


Deposit Competition and the Securitisation Boom

Danny McGowan Huyen Nguyen

in: IWH Discussion Papers, No. 6, 2021


We provide novel evidence that regulatory-induced deposit market competition provoked banks to enter the securitisation market. Exploiting the state-specific removal of interstate bank branching restrictions across U.S states between 1994 and 2006 as an exogenous source of deposit competition, we document four key results. First, the interstate branching deregulation leads to an intensification of deposit market competition. Second, this rise in the cost of deposits increases the probability that a bank operates an ‘originate-to-distribute’ model by 6%. Third, the securitisation effect holds across bank asset classes but is most pronounced for mortgages. Finally, the results are strongest among small and single state banks owing to their reliance on deposit funding. The evidence is consistent with theories where increasing the cost of deposits creates incentives for banks to use securitisation as a cheaper loan funding model. The findings highlight a hitherto neglected supply-side explanation for the rapid expansion in securitisation before the financial crisis and speak to the debate about banking competition policy.

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To Rent or not to Rent: A Household Finance Perspective on Berlin's Short-term Rental Regulation

Antonios Mavropoulos

in: IWH Discussion Papers, No. 1, 2021


With the increasing concerns that accompany the rising trends of house sharing economies, regulators impose new laws to counteract housing supply scarcity. In this paper, I investigate whether the ban on short-term entire house listings activated in Berlin in May 2016 had any adverse effects from a household finance perspective. More specifically, I derive short-term rental income and counter-factually compare it with long-term rental income to find that the ban, by decreasing the supply of short-term housing, accelerated short-term rental income but did not have any direct effect on long-term rental income. Commercial home-owners therefore would find renting on the short-term market to be financially advantageous.

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Housing Consumption and Macroprudential Policies in Europe: An Ex Ante Evaluation

Antonios Mavropoulos Qizhou Xiong

in: IWH Discussion Papers, No. 17, 2018


In this paper, we use the panel of the first two waves of the Household Finance and Consumption Survey by the European Central Bank to study housing demand of European households and evaluate potential housing market regulations in the post-crisis era. We provide a comprehensive account of the housing decisions of European households between 2010 and 2014, and structurally estimate the housing preference of a simple life-cycle housing choice model. We then evaluate the effect of a tighter LTV/LTI regulation via counter-factual simulations. We find that those regulations limit homeownership and wealth accumulation, reduces housing consumption but may be welfare improving for the young households.

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