The surge in credit and house prices that preceded the Great Recession was particularly pronounced in ZIP codes with a higher fraction of subprime borrowers (Mian and Sufi 2009). We present a simple model of prime and subprime borrowers distributed across geographic locations, which can...

We estimate the elasticity of intertemporal substitution (EIS) - the elasticity of expected consumption growth with respect to variation in the real interest rate - using subjective expectations from the newly released FRBNY Survey of Consumer Expectations (SCE). This dataset is unique, since it...

This paper sheds new light on the interactions between business cycles and the consumption distribution. We use Consumer Expenditure Survey data and a factor model to characterize the cyclical dynamics of the consumption distribution. We first establish that our approach is able to closely match...

U.S. households' debt skyrocketed between 2000 and 2007, but has since been falling. This leveraging and deleveraging cycle cannot be accounted for by the liberalization and subsequent tightening of mortgage credit standards that occurred during the period. We base this conclusion on a...

This paper presents new survey evidence on workers' response to the 2011 payroll tax cuts. While workers intended to spend 10 to 18 percent of their tax-cut income, they reported actually spending 28 to 43 percent of the funds. This is higher than estimates from studies of recent tax cuts, and...

We argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending...

Does market incompleteness radically transform the properties of monetary economies? Using an analytically tractable heterogeneous agent New Keynesian (HANK) model, we show that whether incomplete markets resolve "policy paradoxes" in the representative agent New Keynesian model (RANK) depends...

We use quasi-random access to the Home Affordable Refinance Program (HARP) to identify the causal effect of refinancing a mortgage on borrower balance sheet outcomes. We find that on average, refinancing into a lower-rate mortgage reduced borrowers' default rates on mortgages and nonmortgage...

We use survey questions about spending to investigate features of propensities to consume that are useful for distinguishing between consumption theories. Asking households about their intended spending under various scenarios, we find that 1) responses to unanticipated gains are vastly...

In their influential work on the consumption-wealth relationship, Lettau and Ludvigson found that while consumption responds to permanent changes in wealth in the expected manner, most changes in wealth are transitory with no effect on consumption. We investigate the robustness of these results...