Housing Economics

Essi Eerola , together with Niku Määttänen, have recently studied the interaction of matching and credit frictions in the housing market. In their model, risk-averse households may save or borrow in order to smooth consumption over time and finance owner housing. Prospective sellers and buyers meet randomly and bargain over the price. They analyse how borrowing constraints influence house price determination in the presence of matching frictions. They also show that credit frictions greatly magnify the effects of matching frictions. In the presence of matching frictions, a moderate tightening of the borrowing constraint substantially increases idiosyncratic price dispersion and the average time-on-the-market.

Ms Eerola has co-authored numerous papers on housing economics such as: "Matching in the Housing Markets with Risk Aversion and Savings", "Is Social Housing Affordable?", "VAT, Housing and Redistribution" and "Housing Allowance and Rents: Evidence from a Stepwise Subsidy Scheme". Together with Ifo economist Panu Poutvaara, she authored a paper entitled: "Citizens Should Vote on Secession" (Topics in Economic Analysis and Policy, 4(1), 2004).

Essi Eerola is Principal Economist at the Government Institute for Economic Research (VATT) in Helsinki and Advisor at the Monetary Policy and Research Department of the Bank of Finland. She holds a PhD from the University of Helsinki.