Have Consumers Been Deleveraging?

Meta Brown, Andrew Haughwout, Donghoon Lee and Wilbert van der Klaauw

No 20110321, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Since its peak in summer 2008, U.S. consumers? indebtedness has fallen by more than a trillion dollars. Over roughly the same period, charge-offs?the removal of obligations from consumers? credit reports because of defaults?have risen sharply, especially on loans secured by houses, which make up about 80 percent of consumer liabilities. An important question for gauging the behavior of U.S. consumers is how to interpret these two trends. Is the reduction in debts entirely attributable to defaults, or are consumers actively reducing their debts? In this post, we demonstrate that a significant part of the debt reduction was produced by consumers borrowing less and paying off debt more quickly?a process often called deleveraging.

Keywords: Foreclosures; Defaults; Mortgages; Consumer debt; Deleveraging (search for similar items in EconPapers)
JEL-codes: D1 (search for similar items in EconPapers)
Date: 2011-03-21
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