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Debt Portfolios

  • Thomas Hintermaier

    ()

    (Institute for Advanced Studies (IHS), Vienna)

  • Winfried Koeniger

    (Queen Mary, University of London, and IZA)

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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File URL: http://www.econ.qmul.ac.uk/papers/doc/wp646.pdf
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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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  13. Kartik Athreya, 2004. "Fresh start or head start? Uniform bankruptcy exemptions and welfare," Working Paper 03-03, Federal Reserve Bank of Richmond.
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  25. Kartik Athreya, 2008. "A Quantitative Theory of Information and Unsecured Credit," 2008 Meeting Papers 68, Society for Economic Dynamics.
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  29. Kartik Athreya, 2004. "Shame as it ever was : stigma and personal bankruptcy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 1-19.
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