Subprime market victim of housing bubble: Philly Fed paper

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A Philadelphia Federal Reserve paper published on Friday finds evidence that favourable price expectations in the housing market raised lenders' willingness to extend loans in the subprime market.

Jan Brueckner, Paul Calem and Leonard Nakamura, the paper's authors, use a theoretical model and empirical tests to explore the link between the house-price expectations of mortgage lenders and the extent of subprime lending, where subprime lending is a consequence rather than a cause of bubble

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