Journal ArticleDOI
Household Balance Sheets, Consumption, and the Economic Slump*
Atif Mian,Kamalesh Rao,Amir Sufi +2 more
Reads0
Chats0
TLDR
In this article, the authors use the highly unequal geographic distribution of wealth losses across the United States to estimate a large elasticity of consumption with respect to housing net worth of 0.6 to 0.8, which soundly rejects the hypothesis of full consumption risk sharing.Abstract:
lapse using the highly unequal geographic distribution of wealth losses across the United States. We estimate a large elasticity of consumption with respect to housing net worth of 0.6 to 0.8, which soundly rejects the hypothesis of full consumption risk-sharing. The average marginal propensity to consume (MPC) out of housing wealth is 5–7 cents with substantial heterogeneity across ZIP codes. ZIP codes with poorer and more levered households have a significantly higher MPC out of housing wealth. In line with the MPC result, ZIP codes experiencing larger wealth losses, particularly those with poorer and more levered households, experience a larger reduction in credit limits, refinancing likelihood, and credit scores. Our findings highlight the role of debt and the geographic distribution of wealth shocks in explaining the large and unequal decline in consumption from 2006 to 2009. JEL Codes: E21, E32, E44, E60.read more
Citations
More filters
Journal ArticleDOI
Laying the Foundation: Preparing the Field of Business and Society for Investigating the Relationship Between Business and Inequality
TL;DR: With the growth in income inequality now regarded as a crucial social issue, business and society scholars need to prepare themselves for the ambitious task of studying how corporate practices, int... as mentioned in this paper.
Posted Content
Venting Out: Exports During a Domestic Slump
TL;DR: In this article, the authors exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows.
Journal ArticleDOI
Household balance sheet channels of monetary policy: A back of the envelope calculation for the euro area
TL;DR: In this paper, the effects of monetary policy on household consumption expenditures in the euro area were studied. And the authors found that the indirect labor income channel and the housing wealth effect are strong drivers of the aggregate consumption response to monetary policy and explain the cross-country heterogeneity in these responses.
Posted Content
Consumer Bankruptcy and Financial Health
TL;DR: In this article, the effect of Chapter 13 bankruptcy protection on post-filing financial outcomes using a new dataset linking bankruptcy filings to credit bureau records was estimated using the leniency of randomly-assigned judges as an instrument for Chapter 13 protection.
Posted Content
Tobin LIVES: Integrating evolving credit market architecture into flow of funds based macro-models
John V. Duca,John Muellbauer +1 more
TL;DR: In this article, a model for analysing the household flow of funds jointly with consumption is proposed, where the consumption function incorporates household income, portfolios of assets and debt held at the end of the previous period, credit availability, and asset prices and interest rates.
References
More filters
Journal ArticleDOI
Optimum consumption and portfolio rules in a continuous-time model☆
TL;DR: In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.
Posted Content
Agency Costs, Net Worth, And Business Fluctuations
Ben S. Bernanke,Mark Gertler +1 more
TL;DR: The authors constructs a simple neoclassical model of intrinsic business cycle dynamics in which borrowers' balance sheet positions play an important role and shows that the agency costs of undertaking physical investments are inversely related to the entrepreneur's/borrower's net worth.
Posted ContentDOI
Agency Costs, Net Worth, and Business Fluctuations.
Mark Gertler,Ben S. Bernanke +1 more
TL;DR: The authors developed a simple neoclassical model of the business cycle in which the condition of borrowers' balance sheets is a source of output dynamics, and the mechanism is that higher borrower net worth reduces the agency costs of financing real capital investments.
Journal ArticleDOI
Home Bias at Home: Local Equity Preference in Domestic Portfolios
TL;DR: The authors showed that the strong bias in favor of domestic securities is a well-documented characteristic of international investment portfolios, yet the preference for investing close to home also applies to portfolios of domestic stocks.
Book ChapterDOI
Optimum Consumption and Portfolio Rules in a Continuous-Time Model*
TL;DR: In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.
Related Papers (5)
House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis
Atif Mian,Amir Sufi +1 more
Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach*
Gauti B. Eggertsson,Paul Krugman +1 more
The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis
Atif Mian,Amir Sufi +1 more