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The Persistence of Financial Distress

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

No 17-14, Working Paper from Federal Reserve Bank of Richmond

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)
New Economics Papers: this item is included in nep-cfn and nep-mac
Date: 2017-11-09
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Related works:
Working Paper: The Persistence of Financial Distress (2018) Downloads
Working Paper: The Persistence of Financial Distress (2018) Downloads
Working Paper: The Persistence of Financial Distress (2017) Downloads
Working Paper: The Persistence of Financial Distress (2016) Downloads
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