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Personal-bankruptcy cycles

Author

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  • Thomas A. Garrett
  • Howard J. Wall

Abstract

This paper estimates the dynamics of the personal-bankruptcy rate over the business cycle by exploiting large cross-state variation in recessions and bankruptcies. 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 that occur during recessions, the largest contributor to rising bankruptcies during these periods has tended to be the longstanding upward trend.

Suggested Citation

  • Thomas A. Garrett & Howard J. Wall, 2010. "Personal-bankruptcy cycles," Working Papers 2010-010, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2010-010
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    References listed on IDEAS

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    Cited by:

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    2. Samir Amine & Wilner Predelus, 2019. "The Persistence of the 2008-2009 Recession and Insolvency Filings in Canada," Economics Bulletin, AccessEcon, vol. 39(1), pages 84-93.

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    More about this item

    Keywords

    Bankruptcy; Finance; Personal;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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