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Household Leveraging and Deleveraging

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  • Justiniano, Alejandro
  • Primiceri, Giorgio E
  • Tambalotti, Andrea

Abstract

Abstract. U.S. households' debt skyrocketed between 2000 and 2007, and has been falling since. This leveraging (and deleveraging) cycle cannot be accounted for by the liberalization, and subsequent tightening, of credit standards in mortgage markets observed during the same period. We base this conclusion on a quantitative dynamic general equilibrium model calibrated using macroeconomic aggregates and microeconomic data from the Survey of Consumer Finances. From the perspective of the model, the credit cycle is more likely due to factors that impacted house prices more directly, thus affecting the availability of credit through a collateral channel. In either case, the macroeconomic consequences of leveraging and deleveraging are relatively minor, because the responses of borrowers and lenders roughly wash out in the aggregate.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9671.

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Date of creation: Oct 2013
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Handle: RePEc:cpr:ceprdp:9671

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Keywords: Collateral constraints; Financial liberalization; House prices; Household debt;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Household leveraging and deleveraging
    by Christian Zimmermann in NEP-DGE blog on 2013-03-24 22:12:39
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Cited by:
  1. Thorsten Beck & Andrea Colciago & Damjan Pfajfar, 2014. "The role of financial intermediaries in monetary policy transmission," DNB Working Papers 420, Netherlands Central Bank, Research Department.
  2. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2013. "The Effects of the saving and banking glut on the U.S. economy," Staff Reports 648, Federal Reserve Bank of New York.
  3. Braxton, John Carter & Knotek, Edward S., 2014. "Consumer debt dynamics:follow the increasers," Research Working Paper RWP 14-2, Federal Reserve Bank of Kansas City.
  4. Michal Brzoza-Brzezina, 2014. "Financial Frictions and Macroprudential Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 10(2), pages 249-261, June.
  5. Pei Kuang, 2013. "Imperfect Knowledge About Asset Prices and Credit Cycles," Discussion Papers 13-02r, Department of Economics, University of Birmingham.
  6. Christoph Basten & Cathérine Koch, 2014. "The causal effect of house prices on mortgage demand and mortgage supply," ECON - Working Papers 140, Department of Economics - University of Zurich.
  7. Sami Alpanda & Sarah Zubairy, 2013. "Housing and Tax Policy," Working Papers 13-33, Bank of Canada.

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