The Persistence of Financial Distress

Kartik Athreya, Jose Mustre-del-Rio and Juan M. Sanchez

No RWP 17-15, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: Using recently available proprietary panel data, we show that while many (35%) US consumers experience fi nancial distress at some point in the life cycle, most of the events of nancial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble. Roughly 10% of consumers are distressed for more than a quarter of the life cycle, and less than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of heterogeneity in time preference but not otherwise.

Keywords: Default; financial distress; Consumer credit; credit card debt (search for similar items in EconPapers)
JEL-codes: D60 E21 E44 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-11-27
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pay
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The Persistence of Financial Distress (2019)
Journal Article: The Persistence of Financial Distress (2019)
Working Paper: The Persistence of Financial Distress (2018)
Working Paper: The Persistence of Financial Distress (2017)
Working Paper: The Persistence of Financial Distress (2017)
Working Paper: The Persistence of Financial Distress (2016)
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