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Thursday, August 27, 2009

Followup

Mike Smitka

One quick point: if the underlying analysis of the previous post of a specific link between the housing bubble, the use of home equity lines and thence car sales is accurate, then we should see that showing up in differential behavior in low-bubble and high-bubble economies: areas with big bubbles should have had a greater car sales boom and a greater crunch (including repossessions). Of course empirically that could be difficult to identify, because the "bubble" areas (as I believe is very much the case, but have not checked) have higher unemployment and hence will have lower car sales and higher repossessions, independent of a finance link. Perhaps that can be done because only certain classes of credit histories showed a propensity to use home equity, whereas unemployment may hit both the conservative and the spendthrift alike. That's not an easy empirical task, closer to what might be needed for a serious PhD-level research project if not a multi-year PhD thesis project.