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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.

New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018
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Working Paper: Household Leverage and the Recession (2018) Downloads
Working Paper: Household Leverage and the Recession (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:933

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More papers in 2018 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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