Household Leverage and the Recession

Callum Jones

No 933, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: During the Great Recession, employment declined more in regions 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 using Bayesian likelihood methods on state-level and aggregate data. Credit shocks account well for the differential rise and fall of employment across individual states. Credit shocks explain a smaller fraction of the initial drop in aggregate employment but the tightening of household credit greatly contributes to the slow recovery in the aftermath of recession.

Date: 2018
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Household Leverage and the Recession (2018)
Working Paper: Household Leverage and the Recession (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:933

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