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The Role Of Household Debt Heterogeneity On Consumption
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Book Synopsis The Role of Household Debt Heterogeneity on Consumption by : Jouchi Nakajima
Download or read book The Role of Household Debt Heterogeneity on Consumption written by Jouchi Nakajima and published by . This book was released on 2018 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates the impact of household debt on consumption behaviour using data from the Japanese Preference Parameters Study. Covering the 2005-13 period, the survey is the first of its kind for Japan. It features responses to forward-looking questions about key risks to income, shedding light on the motives for household savings behaviour. The analysis finds that household marginal propensities to consume (MPCs) were significantly higher for highly-indebted Japanese households than for those with little-to-no debt - a type of variation that is consistent with findings for other countries. The evidence points to a significant precautionary saving motive by Japanese households, with savers particularly concerned about (unlikely) future unemployment spells and longevity risks.
Book Synopsis Household Leverage and the Recession by : Callum Jones
Download or read book Household Leverage and the Recession written by Callum Jones and published by International Monetary Fund. This book was released on 2018-08-30 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We evaluate and partially challenge the ‘household leverage’ view of the Great Recession. In the data, employment and consumption declined more in states where household debt declined more. We study a model where liquidity constraints amplify the response of consumption and employment to changes in debt. We estimate the model with Bayesian methods combining state and aggregate data. Changes in household credit limits explain 40 percent of the differential rise and fall of employment across states, but a small fraction of the aggregate employment decline in 2008-2010. Nevertheless, since household deleveraging was gradual, credit shocks greatly slowed the recovery.
Book Synopsis Who Bears the Cost of Recessions? by : Atif Mian
Download or read book Who Bears the Cost of Recessions? written by Atif Mian and published by . This book was released on 2016 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This chapter reviews empirical estimates of differential income and consumption growth across individuals during recessions. Most existing studies examine the variation in income and consumption growth across individuals by sorting on ex ante or contemporaneous income or consumption levels. We build on this literature by showing that differential shocks to household net worth coming from elevated household debt and the collapse in house prices play an underappreciated role. Using zip codes in the United States as the unit of analysis, we show that the decline in numerous measures of consumption during the Great Recession was much larger in zip codes that experienced a sharp decline in housing net worth. In the years prior to the recession, these same zip codes saw high house price growth, a substantial expansion of debt by homeowners, and high consumption growth. We discuss what models seem most consistent with this striking pattern in the data, and we highlight the increasing body of macroeconomic evidence on the link between household debt and business cycles. Our main conclusion is that housing and household debt should play a larger role in models exploring the importance of household heterogeneity on macroeconomic outcomes and policies.
Book Synopsis Household Saving in Japan by : Charles Yuji Horioka
Download or read book Household Saving in Japan written by Charles Yuji Horioka and published by . This book was released on 1986 with total page 484 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Who Bears the Cost of Recessions? The Role of House Prices and Household Debt by : Atif R. Mian
Download or read book Who Bears the Cost of Recessions? The Role of House Prices and Household Debt written by Atif R. Mian and published by . This book was released on 2018 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This chapter reviews empirical estimates of differential income and consumption growth across individuals during recessions. Most existing studies examine the variation in income and consumption growth across individuals by sorting on ex ante or contemporaneous income or consumption levels. We build on this literature by showing that differential shocks to household net worth coming from elevated household debt and the collapse in house prices play an underappreciated role. Using zip codes in the United States as the unit of analysis, we show that the decline in numerous measures of consumption during the Great Recession was much larger in zip codes that experienced a sharp decline in housing net worth. In the years prior to the recession, these same zip codes saw high house price growth, a substantial expansion of debt by homeowners, and high consumption growth. We discuss what models seem most consistent with this striking pattern in the data, and we highlight the increasing body of macroeconomic evidence on the link between household debt and business cycles. Our main conclusion is that housing and household debt should play a larger role in models exploring the importance of household heterogeneity on macroeconomic outcomes and policies.
Book Synopsis Handbook of US Consumer Economics by : Andrew Haughwout
Download or read book Handbook of US Consumer Economics written by Andrew Haughwout and published by Academic Press. This book was released on 2019-08-12 with total page 456 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of U.S. Consumer Economics presents a deep understanding on key, current topics and a primer on the landscape of contemporary research on the U.S. consumer. This volume reveals new insights into household decision-making on consumption and saving, borrowing and investing, portfolio allocation, demand of professional advice, and retirement choices. Nearly 70% of U.S. gross domestic product is devoted to consumption, making an understanding of the consumer a first order issue in macroeconomics. After all, understanding how households played an important role in the boom and bust cycle that led to the financial crisis and recent great recession is a key metric. Introduces household finance by examining consumption and borrowing choices Tackles macro-problems by observing new, original micro-data Looks into the future of consumer spending by using data, not questionnaires
Book Synopsis The Impact of Public Policy on Consumer Credit by : Thomas A. Durkin
Download or read book The Impact of Public Policy on Consumer Credit written by Thomas A. Durkin and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt: As both the twenty-first century and the new millennium opened and the old eras passed into history, individuals and organizations throughout the world advanced their listings of the most significant people and events in their respective specialties. Possibly more important, the tum of the clock and calendar also offered these same observers a good reason to glance into the crystal ball. Presumably, the past is of greatest interest to most people when it permits better understanding of the present, and maybe even limited insight into the outlook. In keeping with the reflective mood of the time, the staff and friends of the Credit Research Center (CRC) at Georgetown University's McDonough School of Business noted that the beginning of the new millennium also marked the beginning of the second quarter-century of the Center's existence. The Center began at the Krannert Graduate School of Management at Purdue University in 1974 and moved to the McDonough School of Business at Georgetown University in 1997. The silver anniversary of its founding offered the occasion for creating more than another listing of significant past accomplishments and milestones. Rather, it offered the opportunity and, indeed, a mandate for CRC as an academic research center, to undertake a retrospective and future look into the status of research questions pertaining to consumer credit markets. For this reason, the Center organized a research conference which was held in Washington, D. C.
Book Synopsis Household Debt, Liquidity Constraints and the Interest Rate Elasticity of Private Consumption by : Samu Kärkkäinen
Download or read book Household Debt, Liquidity Constraints and the Interest Rate Elasticity of Private Consumption written by Samu Kärkkäinen and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study whether the level of household indebtedness is related to the interest rate elasticity of private consumption. Looking at Finnish aggregate data, we find no robust evidence of increased interest rate elasticity of private consumption even as the household sector's debt-to-income ratio has almost doubled in the past 20 years. Estimates based on the household-level Finnish Wealth Survey suggest that the share of liquidity-constrained households has declined over the same time period, which may have contributed towards muting the sensitivity of private consumption to interest rates even as aggregate debt of the household sector has grown significantly. Our results are consistent with the key role played by heterogeneity in credit and liquidity constraints in driving aggregate consumption and debt dynamics. Other factors behind muted responses of consumption to interest rates may include the recent low interest rate period, which has muted the cash-flow channel of monetary policy, and possible asymmetric effects of monetary policy.
Book Synopsis Dissecting Saving Dynamics by : Mr.Christopher Carroll
Download or read book Dissecting Saving Dynamics written by Mr.Christopher Carroll and published by International Monetary Fund. This book was released on 2012-09-01 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We argue that the U.S. personal saving rate’s long stability (from the 1960s through the early 1980s), subsequent steady decline (1980s - 2007), and recent substantial increase (2008 - 2011) can all be interpreted using a parsimonious ‘buffer stock’ model of optimal consumption in the presence of labor income uncertainty and credit constraints. Saving in the model is affected by the gap between ‘target’ and actual wealth, with the target wealth determined by credit conditions and uncertainty. An estimated structural version of the model suggests that increased credit availability accounts for most of the saving rate’s long-term decline, while fluctuations in net wealth and uncertainty capture the bulk of the business-cycle variation.
Book Synopsis The Role of Collateralized Household Debt in Macroeconomic Stabilization by : Jeffrey R. Campbell
Download or read book The Role of Collateralized Household Debt in Macroeconomic Stabilization written by Jeffrey R. Campbell and published by . This book was released on 2005 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Market innovations following the financial reforms of the early 1980s relaxed collateral constraints on household borrowing. The present paper examines the contribution of this development to the macroeconomic stabilization that occurred shortly thereafter. The model combines collateral constraints on households with heterogeneity of thrift in a calibrated general equilibrium setup. We use this tool to characterize the business cycle implications of lowering required down payments and rates of amortization for durable goods purchases as in the early 1980s. The model predicts that this relaxation of collateral constraints can explain a large fraction of the actual volatility decline in hours worked, output, household debt, and household durable goods purchases.
Book Synopsis Three Essays on Reputation, Household Debt, and Monetary Policy by : Clodomiro F. Ferreira Mayorga
Download or read book Three Essays on Reputation, Household Debt, and Monetary Policy written by Clodomiro F. Ferreira Mayorga and published by . This book was released on 2016 with total page 189 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is composed of three separate and self-contained chapters on two different areas: (i) reputation building and competition in on-line markets, and (ii) the heterogeneous transmission of monetary policy to household consumption expenditures and income. The first chapter investigates how sellers' strategic competition for high valuation buyers shapes reputation building incentives in a setting resembling an on-line market, and how it determines the dynamics of prices and reputation itself. Sellers repeatedly auction off a good to a pool of short-lived buyers; efforts and valuations are private information. Ceteris paribus, as the reputation of competitors increase (intensity of competition), a seller's incentive to exert effort that helps to successfully complete a transaction decrease. This "intensity" of competition effect, however, quickly disappears as the number of buyers in the market increases, providing a motivation for the use of equilibrium concepts such as "oblivious equilibrium", in which the only payoff relevant reputation is the average one. The second chapter shifts focus to household expenditure, debt and monetary policy. It is shown that, in response to an interest rate change, mortgagors (i.e. households that own a house with a mortgage) in the U.K. and U.S. adjust their spending significantly (especially on durable goods) but outright home-owners (i.e. households that own a house outright) do not. While the dollar change in mortgage payments is nearly three times larger in the U.K. than in the U.S., these magnitudes are much smaller than the overall change in expenditure. In contrast, the income change is sizable and similar across both household groups and countries. Consistent with the predictions of a simple heterogeneous agents model with credit-constrained households and multi-period fixed-rate debt contracts, our evidence suggests that the general equilibrium effect of monetary policy on income is quantitatively more important than the direct effect on cash-flows. Finally, the third chapter exploits individual mortgage data in the UK to try to further understand the role of mortgagor's balance sheets in the transmission of monetary policy. Estimation results point in the direction of significant heterogeneity in two dimensions: (i) in the response of observed leverage (loan-to-value) and affordability (loan-to-income) ratios at the time of origination for the median mortgagor, and (ii) the response of LTVs for households that are first-time-buyers and those that are non-first-time-buyers.
Book Synopsis Heterogeneity and Persistence in Returns to Wealth by : Andreas Fagereng
Download or read book Heterogeneity and Persistence in Returns to Wealth written by Andreas Fagereng and published by International Monetary Fund. This book was released on 2018-07-27 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.
Book Synopsis Inequality, Leverage and Crises by : Mr.Michael Kumhof
Download or read book Inequality, Leverage and Crises written by Mr.Michael Kumhof and published by International Monetary Fund. This book was released on 2010-11-01 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes. A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction. But restoration of the lower income group's bargaining power is more effective.
Book Synopsis Disentangling the Effect of Household Debt on Consumption by : Kan Ji
Download or read book Disentangling the Effect of Household Debt on Consumption written by Kan Ji and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Role of Household Debt and Balance Sheets in the Monetary Transmission Mechanism by : Garry Young
Download or read book The Role of Household Debt and Balance Sheets in the Monetary Transmission Mechanism written by Garry Young and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is considerable uncertainty about the effect of household debt on the macroeconomy and its role in the monetary transmission mechanism. This article summarises conclusions from recent Bank of England research aimed at shedding light on this issue. It argues that the extent to which levels of household debt affect the outlook for the economy and the way in which the economy responds to unexpected developments, depends on the circumstances of individual borrowers and lenders, as well as wider economic conditions. Recent evidence suggests that there has been little difference in the amount by which the spending of high and low debt households has responded to changes in those households' financial position. This is likely to be because the benign economic environment and favourable lending conditions have made it easier for households to smooth over adverse shocks. Nevertheless, adverse interactions between debt, house prices and consumption could arise in other circumstances. As such, there is a need to keep this situation under review by continued monitoring of household and lender balance sheets.
Book Synopsis Assessing Macro-Financial Risks of Household Debt in China by : Mr.Fei Han
Download or read book Assessing Macro-Financial Risks of Household Debt in China written by Mr.Fei Han and published by International Monetary Fund. This book was released on 2019-11-27 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household indebtedness could boost consumption in the short term, while reducing it in the medium-to-long term. By stress testing households’ debt repayment capacity, we find that low-income households are most vulnerable to adverse income shocks which could lead to signficant defaults. Containing these risks would call for a strengthening of systemic risk assessment and macroprudential policies of the household sector. Other policies include improving the credit registry system and establishing a well-functioning personal insolvency framework.
Book Synopsis Wealth Effect on Consumption During the Sovereign Debt Crisis by : Bertrand Garbinti
Download or read book Wealth Effect on Consumption During the Sovereign Debt Crisis written by Bertrand Garbinti and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the heterogeneity of the marginal propensity to consume out of wealth (MPC) both across and within countries. We estimate the MPC based on a cross-country harmonized household level dataset which combines surveys on wealth, income and consumption. We use panel regressions and an instrumental variable approach. First, our panel-based MPC estimates are very similar to those obtained on aggregate data and show substantial heterogeneity across countries. The wealth effect is coming both from housing and financial assets, while the main asset channel varies between countries. Second, the MPC is higher for low-wealth households, whatever the country. Third, we find some asymmetries across countries regarding the reaction to losses versus gains. Fourth, higher MPC is obtained for the two main consumption expenditure categories. Fifth, we find evidences that housing prices shock decreases consumption inequality while financial wealth shocks have a limited effect on consumption inequality.
