IDEAS home Printed from https://ideas.repec.org/p/red/sed018/1085.html
   My bibliography  Save this paper

Bankruptcy and Aggregate Demand

Author

Listed:
  • Adrien Auclert

    (Stanford)

  • Kurt Mitman

    (IIES)

Abstract

We study the effect of consumer default policy on macroeconomic stabilization. We focus on an economy with nominal rigidities, incomplete financial markets and heterogeneous households. Households face uninsurable idiosyncratic risk and have access to unsecured borrowing with limited commitment to repay. By adjusting the leniency of the bankruptcy code, the government can affect the extent of redistribution between high MPC borrowers and low MPC savers in downturns. If monetary policy cannot fully accommodate negative shocks, giving rise to an aggregate demand externality, macroprudential default policy can be welfare improving. We explore the welfare gains from both state-dependent and state-independent default policies.

Suggested Citation

  • Adrien Auclert & Kurt Mitman, 2018. "Bankruptcy and Aggregate Demand," 2018 Meeting Papers 1085, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:1085
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2018/paper_1085.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adrien Auclert & Will S. Dobbie & Paul Goldsmith-Pinkham, 2019. "Macroeconomic Effects of Debt Relief: Consumer Bankruptcy Protections in the Great Recession," NBER Working Papers 25685, National Bureau of Economic Research, Inc.
    2. Gajendran Raveendranathan & Georgios Stefanidis, 2020. "The Unprecedented Fall in U.S. Revolving Credit," Department of Economics Working Papers 2020-05, McMaster University.
    3. Kyle F. Herkenhoff & Gajendran Raveendranathan, 2019. "Who Bears the Welfare Costs of Monopoly? The Case of the Credit Card Industry," Working Papers 2019-071, Human Capital and Economic Opportunity Working Group.
    4. Exler, Florian & Tertilt, Michèle, 2020. "Consumer Debt and Default: A Macro Perspective," IZA Discussion Papers 12966, Institute of Labor Economics (IZA).
    5. Mallucci, Enrico, 2022. "Natural disasters, climate change, and sovereign risk," Journal of International Economics, Elsevier, vol. 139(C).
    6. Raveendranathan, Gajendran, 2020. "Revolving credit lines and targeted search," Journal of Economic Dynamics and Control, Elsevier, vol. 118(C).
    7. Tertilt, Michèle & Exler, Florian, 2020. "Consumer Debt and Default: A Macroeconomic Perspective," CEPR Discussion Papers 14425, C.E.P.R. Discussion Papers.
    8. Broer, Tobias, 2020. "Consumption insurance over the business cycle," CEPR Discussion Papers 14579, C.E.P.R. Discussion Papers.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed018:1085. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.