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Debt Portfolios

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  • Thomas Hintermaier

    ()
    (Institute for Advanced Studies (IHS), Vienna)

  • Winfried Koeniger

    (Queen Mary, University of London, and IZA)

Abstract

We provide a model with endogenous portfolios of secured and unsecured household debt. Secured debt is collateralized by durables whereas unsecured debt can be discharged in bankruptcy procedures. We show that the model matches the main quantitative characteristics of observed wealth and debt portfolios in the US and some of the observed changes over time. Furthermore, we establish two quantitative results. Firstly, modest levels of risk aversion are necessary to match observed debt portfolios. Secondly, durables do not improve consumers' access to unsecured credit, and plausible variations of durable exemptions in bankruptcy procedures have very small effects on the equilibrium.

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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 646.

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Date of creation: Jun 2009
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Handle: RePEc:qmw:qmwecw:wp646

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Keywords: Household debt portfolios; Durables; Collateral; Income risk; Bankruptcy;

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Cited by:
  1. Bajari, Patrick & Chan, Phoebe & Krueger, Dirk & Miller, Daniel, 2010. "A Dynamic Model of Housing Demand: Estimation and Policy Implications," CEPR Discussion Papers 7911, C.E.P.R. Discussion Papers.
  2. Solomon, Bernard Daniel, 2010. "Firm leverage, household leverage and the business cycle," MPRA Paper 26504, University Library of Munich, Germany.
  3. Michal Rubaszek & Dobromil Serwa, 2011. "Determinants of credit to households in a life-cycle model," National Bank of Poland Working Papers 92, National Bank of Poland, Economic Institute.
  4. Mankart, Jochen, 2014. "The (Un-) importance of Chapter 7 wealth exemption levels," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 1-16.
  5. Xavier Mateos-Planas & David Benjamin, 2012. "Formal vs. Informal Default in Consumer Credit," 2012 Meeting Papers 144, Society for Economic Dynamics.
  6. Fernández-Villaverde, Jesús & Krueger, Dirk, 2011. "Consumption And Saving Over The Life Cycle: How Important Are Consumer Durables?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(05), pages 725-770, November.
  7. Mankart, Jochen & Rodano, Giacomo, 2012. "Bankruptcy Law, Debt Portfolios, and Entrepreneurship," Economics Working Paper Series 1216, University of St. Gallen, School of Economics and Political Science.

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