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Changes in U.S. household balance sheet behavior after the housing bust and Great Recession: evidence from panel data

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  • Daniel Cooper
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    Abstract

    This paper uses panel data through 2011 to examine evidence of shifts in household balance sheet behavior following the financial crisis and Great Recession. The paper considers evidence of balance sheet repair through debt repayment as well as changes in the composition of households’ balance sheets and/or saving decisions to determine whether households’ desire for holding or investing in riskier versus safer assets has changed. The data show relatively small and limited balance sheet adjustment—especially for those households considered the most likely to have been impacted by the economic collapse. The adjustment that did occur typically raised households’ liquid asset holdings and/or saving and reduced their risky asset positions (stocks). There is also some evidence of increased nonhousing debt repayment and slower takeup of new nonhousing debt. Overall, the findings are inconsistent with major adjustments occurring in households’ balance sheet behavior—especially to the extent where these shifts would have contributed substantially to the sluggish economic recovery

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    File URL: http://www.bostonfed.org/economic/ppdp/2013/ppdp1306.htm
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    File URL: http://www.bostonfed.org/economic/ppdp/2013/ppdp1306.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Boston in its series Public Policy Discussion Paper with number 13-6.

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    Date of creation: 2013
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    Handle: RePEc:fip:fedbpp:13-6

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    Keywords: Households - Economic aspects ; Saving and investment;

    This paper has been announced in the following NEP Reports:

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    1. F. Thomas Juster & Joseph P. Lupton & James P. Smith & Frank Stafford, 2006. "The Decline in Household Saving and the Wealth Effect," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 20-27, February.
    2. Atif Mian & Kamalesh Rao & Amir Sufi, 2013. "Household Balance Sheets, Consumption, and the Economic Slump," The Quarterly Journal of Economics, Oxford University Press, vol. 128(4), pages 1687-1726.
    3. Edward S. Knotek II & John Carter Braxton, 2012. "What drives consumer debt dynamics?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV.
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