Liquidity Effects of Unemployment Insurance Benefit Extensions: Evidence from Consumer Credit Data

Rene Chalom, Benjamin Pugsley, Fatih Karahan and Kurt Mitman
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Rene Chalom: Federal Reserve Bank of New York

No 438, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Recipients of unemployment insurance benefits may allocate payouts towards consumption, savings, or servicing outstanding debt. This paper examines the effects that unemployment benefits have on mortgage, automobile loan, and credit card debt delinquency, exploiting the variation across states in the magnitude of unemployment benefit extensions that were provided in response to the Great Recession. We find that additional unemployment benefits reduced mortgage debt delinquency in locations that avoided large home price declines in the aftermath of the recession. Accordingly, we conclude that the stimulus effects of unemployment insurance may be muted to the extent that benefit payments are used to satisfy housing debt obligations.

Date: 2019
New Economics Papers: this item is included in nep-ban, nep-ias, nep-pay, nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:438

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