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Household Leveraging and Deleveraging

  • Alejandro Justiniano
  • Giorgio E. Primiceri
  • Andrea Tambalotti

U.S. households' debt skyrocketed between 2000 and 2007, and has been falling since. This leveraging (and deleveraging) cycle cannot be accounted for by the liberalization, and subsequent tightening, of credit standards in mortgage markets observed during the same period. We base this conclusion on a quantitative dynamic general equilibrium model calibrated using macroeconomic aggregates and microeconomic data from the Survey of Consumer Finances. From the perspective of the model, the credit cycle is more likely due to factors that impacted house prices more directly, thus affecting the availability of credit through a collateral channel. In either case, the macroeconomic consequences of leveraging and deleveraging are relatively minor, because the responses of borrowers and lenders roughly wash out in the aggregate.

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File URL: http://www.nber.org/papers/w18941.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18941.

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Date of creation: Apr 2013
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Publication status: published as Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2015. "Household leveraging and deleveraging," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(1), pages 3-20, January.
Handle: RePEc:nbr:nberwo:18941
Note: EFG ME
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