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Liquidity Effects of Unemployment Insurance Benefit Extensions: Evidence from Consumer Credit Data

Author

Listed:
  • Rene Chalom

    (Federal Reserve Bank of New York)

  • Benjamin Pugsley

    (University of Notre Dame)

  • Fatih Karahan

    (Federal Reserve Bank of New York)

  • Kurt Mitman

    (Stockholm University)

Abstract

Recipients of unemployment insurance benefits may allocate payouts towards consumption, savings, or servicing outstanding debt. This paper examines the effects that unemployment benefits have on mortgage, automobile loan, and credit card debt delinquency, exploiting the variation across states in the magnitude of unemployment benefit extensions that were provided in response to the Great Recession. We find that additional unemployment benefits reduced mortgage debt delinquency in locations that avoided large home price declines in the aftermath of the recession. Accordingly, we conclude that the stimulus effects of unemployment insurance may be muted to the extent that benefit payments are used to satisfy housing debt obligations.

Suggested Citation

  • Rene Chalom & Benjamin Pugsley & Fatih Karahan & Kurt Mitman, 2019. "Liquidity Effects of Unemployment Insurance Benefit Extensions: Evidence from Consumer Credit Data," 2019 Meeting Papers 438, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:438
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    References listed on IDEAS

    as
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    3. Alexander Bogin & William Doerner & William Larson, 2019. "Local House Price Dynamics: New Indices and Stylized Facts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 47(2), pages 365-398, June.
    4. Joanne W. Hsu & David A. Matsa & Brian T. Melzer, 2018. "Unemployment Insurance as a Housing Market Stabilizer," American Economic Review, American Economic Association, vol. 108(1), pages 49-81, January.
    5. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
    6. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
    7. J. Carter Braxton & Gordon Phillips & Kyle Herkenhoff, 2018. "Can the Unemployed Borrow? Implications for Public Insurance," 2018 Meeting Papers 564, Society for Economic Dynamics.
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