This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Financial innovation and the Great Moderation: what do household data say?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Karen E. Dynan
Douglas W. Elmendorf
Daniel E. Sichel

Additional information is available for the following registered author(s):

Abstract

Aggressive deregulation of the household debt market in the early 1980s triggered innovations that greatly reduced the required home equity of U.S. households, allowing them to cash-out a large part of accumulated equity. In 1982, home equity equaled 71 percent of GDP; so this generated a borrowing shock of huge macroeconomic proportions. The combination of increasing household debt from 43 to 56 percent of GDP with high interest rates during the 1982-1990 period is consistent with such a shock to households’ demand for funds. This paper uses a quantitative general equilibrium model of lending from the wealthy to the middle class to evaluate the positive and normative aspects of the transition to a high debt economy. Using the model, we interpret evidence on the changing distribution of assets and debt as well as macro time series since 1982.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.frbsf.org/economics/conferences/0611/2_Sichel.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Article provided by Federal Reserve Bank of San Francisco in its journal Proceedings.

Volume (Year): (2006)
Issue (Month): Nov ()
Pages:
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:fip:fedfpr:y:2006:i:nov:x:2

Contact details of provider:
Postal: P.O. Box 7702, San Francisco, CA 94120-7702
Phone: (415) 974-2000
Fax: (415) 974-3333
Email:
Web page: http://www.frbsf.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.frbsf.org/popups/fiporder.html

For technical questions regarding this item, or to correct its listing, contact: (Diane Rosenberger).

Related research
Keywords: Households - Economic aspects;

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Attanasio, Orazio & Davis, Steven J, 1996. "Relative Wage Movements and the Distribution of Consumption," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1227-62, December. [Downloadable!] (restricted)
    Other versions:
  2. Jonathan D. Fisher & David S. Johnson, 2006. "Consumption Mobility in the United States: Evidence from Two Panel Data Sets," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  3. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Working Papers 12354, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1991-2), pages 1-74. [Downloadable!]
  5. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 603-640, May. [Downloadable!] (restricted)
    Other versions:
  6. Urban Jermann & Vincenzo Quadrini, 2006. "Financial Innovations and Macroeconomic Volatility," NBER Working Papers 12308, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Christopher D Carroll & Wendy E Dunn, 1997. "Unemployment Expectations Jumping (Ss) Triggers and Household Balance Sheets," Economics Working Paper Archive 386, The Johns Hopkins University,Department of Economics.
    Other versions:
  8. Margaret M. McConnell & Gabriel Perez Quiros, 1998. "Output fluctuations in the United States: what has changed since the early 1980s?," Staff Reports 41, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  9. Diego Comin & Sunil Mulani, 2006. "Diverging Trends in Aggregate and Firm Volatility," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 374-383, 06. [Downloadable!] (restricted)
  10. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages C68-C73, March. [Downloadable!] (restricted)
  11. Dynan, Karen E. & Elmendorf, Douglas W. & Sichel, Daniel E., 2006. "Can financial innovation help to explain the reduced volatility of economic activity?," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 123-150, January. [Downloadable!] (restricted)
    Other versions:
  12. Urban Jermann & Vincenzo Quadrini, 2006. "Financial innovations and macroeconomic volatility," Proceedings, Federal Reserve Bank of San Francisco, issue Nov. [Downloadable!]
  13. Kristopher Gerardi & Harvey S. Rosen & Paul Willen, 2006. "Do households benefit from financial deregulation and innovation?: the case of the mortgage market," Public Policy Discussion Paper 06-6, Federal Reserve Bank of Boston. [Downloadable!]
  14. Diego Comin & Thomas Philippon, 2005. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Working Papers 11388, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Orazio Attanasio & Gabriella Berloffa & Richard Blundell & Ian Preston, 2002. "From Earnings Inequality to Consumption Inequality," Economic Journal, Royal Economic Society, vol. 112(478), pages C52-C59, March. [Downloadable!] (restricted)
  16. Joe Peek & James A. Wilcox, 2006. "Housing, Credit Constraints, and Macro Stability: The Secondary Mortgage Market and Reduced Cyclicality of Residential Investment," American Economic Review, American Economic Association, vol. 96(2), pages 135-140, May. [Downloadable!]
  17. Banks, James & Blundell, Richard & Brugiavini, Agar, 2001. "Risk Pooling, Precautionary Saving and Consumption Growth," Review of Economic Studies, Blackwell Publishing, vol. 68(4), pages 757-79, October.
    Other versions:
  18. Caterina Mendicino, 2007. "Credit market and macroeconomic volatility," Working Paper Series 743, European Central Bank. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mark Doms & Fred Furlong & John Krainer, 2007. "Subprime mortgage delinquency rates," Working Paper Series 2007-33, Federal Reserve Bank of San Francisco. [Downloadable!]
Statistics
Access and download statistics

Did you know? About five million pdf files are downloaded through RePEc every year.

This page was last updated on 2009-12-12.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.