Chao Liu 刘超
I am an Assistant Professor of Finance at the Chinese University of Hong Kong (CUHK) Business School.
I received my Ph.D. from Northwestern University (Kellogg).
My research interests are in household finance, real estate, and development economics.
Curriculum Vitae: CV
Email: chaoliu@cuhk.edu.hk
Working Papers
Regulating Intermediaries in Credit Markets: Evidence from Mortgage Brokers
with Tianshi Mu and Yiyi Zhou
Abstract
Intermediaries in financial markets are commonly regulated through licensing. We study how such entry regulation affects credit markets in which borrowers can also reach lenders directly. Exploiting the staggered tightening of state licensing requirements for U.S. mortgage brokers between 1996 and 2006, we find that tighter regulation shrinks the broker sector, and the effects reach well beyond it. Lenders that rely on brokers withdraw from local markets, mortgage applications and originations fall, and interest rates rise in both the broker and retail channels, although retail lenders face none of the requirements. Low-credit-score borrowers, who depend most on brokers, bear the largest effects. Loans originated under stricter licensing default less. A search model where licensing only reduces intermediation capacity of brokers, with broker conduct held fixed, reproduces all of these empirical findings. Our results highlight a trade-off between loan performance and credit access.Language Frictions in Consumer Credit
Revise and Resubmit at Journal of Finance
Abstract
This paper studies how language barriers between lenders and borrowers translate into differences in borrower outcomes in the U.S. mortgage market. I use survey data to infer and machine learning techniques to predict borrowers' English proficiency. I document significant descriptive differences in perceptions of mortgages, application experiences, and mortgage rates between limited English proficient (LEP) and non-LEP borrowers. To measure the causal effects of language frictions, I exploit a Federal Housing Finance Agency policy that provided translated mortgage documents in Spanish to mortgage lenders. After the policy change, LEP Hispanic borrowers had a streamlined application process, contacted more lenders, understood mortgage contracts better, and enjoyed lower borrowing costs. Reducing language frictions also led to expanded access to credit for LEP borrowers. Overall, my findings highlight a cost-effective way to create a responsible inclusion of well-qualified LEP borrowers in the mortgage market.Income Inequality, Housing Supply, and House Prices
with Edmund Y. Lou and Wei Xiang
Abstract
Across U.S. counties, higher income inequality is accompanied by higher house prices, fewer housing units, and lower homeownership. We argue that this pattern reflects a supply-side channel through which income inequality raises house prices. We develop a conceptual framework in which greater income inequality leads to more restrictive housing regulation, tighter housing supply, and higher house prices. Using county-level data from 1990 to 2017 and a novel Bartik-style instrument for the Gini coefficient, we find that a one standard deviation increase in the Gini coefficient raises house prices by 30 percent, reduces building permits by 44 percent over the subsequent decade, and lowers the homeownership rate by 2 percentage points. More unequal areas also exhibit greater opposition to pro-supply housing reform and more restrictive land-use regulation. Our findings highlight how income inequality shapes housing market dynamics through its impact on new housing supply and housing regulation, with important consequences for housing affordability.The Very Long-Run Effect of Large-Scale Deworming
with Gordon G. Liu