The Persistence of Financial Distress

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

No 2017-38, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Using recently available proprietary panel data, we show that while many (35%) US consumers experience financial distress at some point in the life cycle, most of the events of financial 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: 39 pages
Date: 2017-11-09
New Economics Papers: this item is included in nep-dge and nep-mac
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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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DOI: 10.20955/wp.2017.038

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