Welfare implications of the transition to high household debt

Jeffrey Campbell and Zvi Hercowitz ()

No WP-06-27, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Aggressive deregulation of the mortgage market in the early 1980s triggered innovations that greatly reduced the required home equity of U.S. households. This allowed households to cash-out a large part of accumulated equity, which equaled 71 percent of GDP in 1982. A borrowing surge followed: Household debt increased from 43 to 62 percent of GDP in the 1982- 2000 period. What are the welfare implications of such a reform for borrowers and savers? This paper uses a calibrated general equilibrium model of lending from the wealthy to the middle class to evaluate these effects quantitatively.

Keywords: Debt; Mortgage loans; Welfare (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dge and nep-ure
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Citations: View citations in EconPapers (6)

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Journal Article: Welfare implications of the transition to high household debt (2009)
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