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Household Wealth and Macroeconomic Activity: 2008–2013

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  • RAY C. FAIR

Abstract

This paper provides estimates of the effects of the fall in financial and housing wealth in 2008–09 on overall macroeconomic activity. When the wealth losses are run through a structural macroeconometric model, it is estimated that the fall in wealth contributed about 2.1 percentage points to the rise in the unemployment rate in 2009 and about 3.3 points in 2010. The contribution to the fall in real GDP was 4.5% and 5.4% in the 2 years. These estimates account for most—but not all—of the recessionary increase in unemployment. The remaining increase in unemployment may have resulted more directly from financial stresses, but little evidence is found for this in this study.

Suggested Citation

  • Ray C. Fair, 2017. "Household Wealth and Macroeconomic Activity: 2008–2013," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(2-3), pages 495-523, March.
    • Handle: RePEc:wly:jmoncb:v:49:y:2017:i:2-3:p:495-523
    DOI: 10.1111/jmcb.12387
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    References listed on IDEAS

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    1. Mr. Christopher Carroll & Mr. Martin Sommer & Mr. Jiri Slacalek, 2012. "Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects," IMF Working Papers 2012/219, International Monetary Fund.
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    6. Zhou Xia & Carroll Christopher D., 2012. "Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(2), pages 1-44, March.
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    Cited by:

    1. Alam I. Asadov & Mansor H. Ibrahim & Ramazan Yildirim, 2025. "Impact of House Price on Economic Stability: Some Lessons from OECD Countries," The Journal of Real Estate Finance and Economics, Springer, vol. 71(2), pages 254-284, August.
    2. Ray C. Fair, 2020. "Analysis of Nine U.S. Recessions and Three Expansions," Cowles Foundation Discussion Papers 2260R, Cowles Foundation for Research in Economics, Yale University, revised Jan 2021.
    3. Klasen, Stephan & Villalobos, Carlos, 2020. "Diverging identification of the poor: A non-random process. Chile 1992–2017," World Development, Elsevier, vol. 130(C).
    4. Ray C. Fair, 2020. "Analysis of Nine U.S. Recessions and Three Expansions," Cowles Foundation Discussion Papers 2260, Cowles Foundation for Research in Economics, Yale University.
    5. Ray C. Fair, 2018. "Explaining the slow U.S. recovery: 2010–2017," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 53(4), pages 184-194, October.
    6. Engelbert Stockhammer & Erik Bengtsson, 2020. "Financial effects in historic consumption and investment functions," International Review of Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 304-326, May.
    7. Ray C. Fair, 2022. "A note on the fed’s power to lower inflation," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 57(2), pages 56-63, April.

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