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Journal ArticleDOI

Household Balance Sheets, Consumption, and the Economic Slump*

Atif Mian, +2 more
- 01 Nov 2013 - 
- Vol. 128, Iss: 4, pp 1687-1726
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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.

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Journal ArticleDOI

Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data

TL;DR: In this paper, the authors combine income tax returns with Flow of Funds data to estimate the distribution of household wealth in the United States since 1913, showing that wealth concentration has followed a U-shaped evolution over the last 100 years: it was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then.
Journal ArticleDOI

The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008–9 Financial Crisis

TL;DR: In this paper, the authors investigated the effect of bank lending frictions on employment outcomes and found that credit matters, and that withdrawal of credit accounts for between one-third and one-half of the employment decline at small and medium firms in the sample in the year 2007.
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Growth Forecast Errors and Fiscal Multipliers

TL;DR: This article investigated the relation between growth forecast errors and planned fiscal consolidation during the crisis and found that stronger planned consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis.
Journal ArticleDOI

Monetary Policy and the Redistribution Channel

TL;DR: In this paper, the role of redistribution in the transmission mechanism of monetary policy to consumption has been evaluated using consumer theory, and it has been shown that redistribution has aggregate effects whenever marginal propensities to consume (MPCs) covary, across households, with balancesheet exposures to aggregate shocks.
Journal ArticleDOI

What explains the 2007-2009 drop in employment?

TL;DR: The authors show that deterioration in household balance sheets, or the housing net worth channel, played a significant role in the sharp decline in U.S. employment between 2007 and 2009, and there is no significant expansion of the tradable sector in counties with the largest decline in house net worth.
References
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Journal ArticleDOI

The UK Consumption Boom of the Late 1980s: Aggregate Implications of Microeconomic Evidence

TL;DR: The authors used 15 years of Family Expenditure Surveys and cohort analysis to investigate to what extent these two hypotheses agree with observed changes in consumption patterns, and found that the housing markets explanation accounts for much of the increase by older cohorts, but cannot be reconciled with the marked rise in expenditure levels of younger households.
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Debt-Deflation: Theory and Evidence

TL;DR: In the years 1989-92 many of the major industrialised countries experienced protracted periods of below-trend growth, and some the longest recession since the 1930s as mentioned in this paper, and the most severe recessions occurred in those countries which had experienced the largest increases in private debt burdens.
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Avoiding Default: The Role of Credit in the Consumption Collapse of 1930

TL;DR: In the early 1930s, consumer spending collapsed in 1930, turning a minor recession into the Great Depression as discussed by the authors, and households were shouldering an unprecedented burden of installment debt, and missed installment payments triggered repossession, reducing consumer wealth.
Posted Content

Household Leverage and the Recession

TL;DR: In this article, the authors study a cash-in-advance economy in which home equity borrowing, alongside public money, is used to conduct transactions, and they find that declines in home prices tighten the CINA constraint, triggering recessions.
Journal ArticleDOI

An Introduction to the FRBNY Consumer Credit Panel

TL;DR: The FRBNY Consumer Credit Panel as discussed by the authors is a longitudinal database with detailed information on consumer debt and credit, which is used to track individuals and households' access to and use of credit at a quarterly frequency.
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