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Personal-bankruptcy cycles

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  • Garrett, Thomas A.
  • Wall, Howard J.

Abstract

This paper estimates the dynamics of the personal-bankruptcy rate over the business cycle by exploiting large cross-state variation. We find that bankruptcy rates are significantly higher than normal during a recession and rise as a recession persists. After a recession ends, there is a hangover whereby bankruptcy rates begin to fall but remain above normal for several more quarters. Recovery periods see a strong bounce-back effect with bankruptcy rates significantly below normal for several quarters. Despite the significant increases in bankruptcies during recessions, the largest contributor to rising bankruptcies during these periods has tended to be the longstanding upward trend.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30759.

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Date of creation: 23 Aug 2010
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Handle: RePEc:pra:mprapa:30759

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Keywords: Personal Bankruptcy; Recessions;

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References

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  1. Owyang, Michael T. & Piger, Jeremy & Wall, Howard J., 2008. "A state-level analysis of the Great Moderation," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 38(6), pages 578-589, November.
  2. Theodore M. Crone & Alan Clayton-Matthews, 2005. "Consistent Economic Indexes for the 50 States," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 593-603, November.
  3. Lars Lefgren & Frank McIntyre, 2009. "Explaining the Puzzle of Cross-State Differences in Bankruptcy Rates," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 52(2), pages 367-393, 05.
  4. Richard Thalheimer & Mukhtar M. Ali, 2004. "The Relationship of Pari-mutuel Wagering and Casino Gaming to Personal Bankruptcy," Contemporary Economic Policy, Western Economic Association International, vol. 22(3), pages 420-432, 07.
  5. John M. Barron & Michael E. Staten & Stephanie M. Wilshusen, 2002. "The Impact Of Casino Gambling On Personal Bankruptcy Filing Rates," Contemporary Economic Policy, Western Economic Association International, vol. 20(4), pages 440-455, October.
  6. Igor Livshits & James MacGee & Michele Tertilt, 2006. "Accounting for the Rise in Consumer Bankruptcies," Discussion Papers, Stanford Institute for Economic Policy Research 06-001, Stanford Institute for Economic Policy Research.
  7. Reint Gropp & John Karl Scholz & Michelle White, 1996. "Personal Bankruptcy and Credit Supply and Demand," NBER Working Papers 5653, National Bureau of Economic Research, Inc.
  8. Chang-Jin Kim & James Morley & Jeremy Piger, 2003. "Nonlinearity and the permanent effects of recessions," Working Papers, Federal Reserve Bank of St. Louis 2002-014, Federal Reserve Bank of St. Louis.
  9. Thomas A. Garrett, 2007. "The rise in personal bankruptcies: the Eighth Federal Reserve District and beyond," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 15-38.
  10. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
  11. Thomas A. Garrett & Mark W. Nichols, 2005. "Do casinos export bankruptcy?," Working Papers, Federal Reserve Bank of St. Louis 2005-019, Federal Reserve Bank of St. Louis.
  12. Donald P. Morgan & Benjamin Iverson & Matthew Botsch, 2008. "Seismic effects of the bankruptcy reform," Staff Reports, Federal Reserve Bank of New York 358, Federal Reserve Bank of New York.
  13. Michelle J. White, 2007. "Bankruptcy Reform and Credit Cards," NBER Working Papers 13265, National Bureau of Economic Research, Inc.
  14. Michael T. Owyang & Jeremy M. Piger & Howard J. Wall, 2004. "Business cycle phases in U.S. states," Working Papers, Federal Reserve Bank of St. Louis 2003-011, Federal Reserve Bank of St. Louis.
  15. Jon P. Nelson, 1999. "Consumer Bankruptcy And Chapter Choice: State Panel Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 17(4), pages 552-566, October.
  16. Ian Domowitz & Robert L. Sartain, 1999. "Determinants of the Consumer Bankruptcy Decision," Journal of Finance, American Finance Association, American Finance Association, vol. 54(1), pages 403-420, 02.
  17. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, American Economic Association, vol. 92(3), pages 706-718, June.
  18. Michelle J. White, 2007. "Bankruptcy Reform and Credit Cards," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(4), pages 175-200, Fall.
  19. A. Rampini, Adriano, 2005. "Default and aggregate income," Journal of Economic Theory, Elsevier, Elsevier, vol. 122(2), pages 225-253, June.
  20. Jonathan D. Fisher, 2005. "The Effect Of Unemployment Benefits, Welfare Benefits, And Other Income On Personal Bankruptcy," Contemporary Economic Policy, Western Economic Association International, vol. 23(4), pages 483-492, October.
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