Monetary Economics.

• Position: Program and Working Group Meetings

NBER's most recent program meeting on Monetary Economics took place at the Federal Reserve Bank of Chicago on April 18. Organizers Anil K Kashyap, University of Chicago and NBER, and Virgiliu Midrigan, New York University and NBER, chose these papers for discussion:

Atif Mian, University of Chicago and NBER, and Amir Sufi, University of Chicago, "The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis" (NBER Working Paper No. 13936)

Discussant: Stijn Van Nieuwerburgh, New York University

Christopher L. House, University of Michigan and NBER, "Fixed Cost and Long-Lived Investments"

Discussant: Nancy Stokey, University of Chicago

David O. Lucca, Federal Reserve Board, and Francesco Trebbi, University of Chicago and NBER, "Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statements"

Discussant: Kenneth Kutmer, Oberlin College and NBER

Emmanuel Farhi, Harvard University and NBER, and Xavier Gabaix, New York University and NBER, "Rare Disasters and Exchange Rates"(NBER Working Paper No. 13805)

Discussant: Nelson Mark, University of Notre Dame and NBER

Arvind Krishnamurthy, Northwestern University, and Annette Vissing-Jorgensen, Northwestern University and NBER, "The Aggregate Demand for Treasury Debt"

Discussant: Pierre-Olivier Weill, University of California, Los Angeles

Michael Woodford, Columbia University, "Information Constrained State-Dependent Pricing"

Discussant: Mikhail Golosov, MIT and NBER

Mian and Sufi demonstrate that a rapid expansion in the supply of mortgages driven by disintermediation explains a large fraction of recent U.S. house price appreciation and subsequent mortgage defaults. They identify the effect of shifts in the supply of mortgage credit by exploiting within-county variation across zip codes that differed in latent demand for mortgages in the mid-1990s. From 2001 to 2005, high latent demand zip codes experienced large relative decreases in denial rates, increases in mortgages originated, and increases in house price appreciation, despite the fact that these zip codes experienced significantly negative relative income and employment growth over this time period. These patterns for high latent demand zip codes were driven by a sharp relative increase in the fraction of loans sold by originators shortly after origination, a process which the authors refer to as "disintermediation." The increase in disintermediation-driven mortgage supply to high...