We ask two questions related to how access to credit affects the nature of business cycles. First, does the standard theory of unsecured credit account for the high volatility and procyclicality of credit and the high volatility and countercyclicality of bankruptcy filings found in U.S. data?...

Financial innovations are a common explanation of the rise in consumer credit and bankruptcies. To evaluate this story, we develop a simple model that incorporates two key frictions: asymmetric information about borrowers’ risk of default and a fixed cost to create each contract offered by...

The purpose of Directive 2008/48/EC is to harmonize all aspects concerning credit for consumers, in order to unify the internal market and remove any distortion of competition arising from different national regulations. The instrument used consists in achieving a standard status of protection...

We estimate the extent to which legal and administrative fees prevent liquidity-constrained households from declaring bankruptcy. To do so, we study how the 2001 and 2008 tax rebates affected consumer bankruptcy filings. We exploit the randomized timing of the rebate checks and estimate that the...

I construct the life-cycle model with equilibrium default and preferences featuring temptation and self-control. The model provides quantitatively similar answers to positive questions such as the causes of the observed rise in debt and bankruptcies and macroeconomic implications of the 2005...

There has been considerable public debate on the relative merits of alternative consumer bankruptcy rules. The option to discharge one’s debt provides partial insurance against bad luck, but by driving up interest rates makes lifecycle smoothing more difficult. We construct a quantitative...

Several studies have attributed the rise of household bankruptcy in the past two decades to the decline of social stigma associated with default. Stigma explanations, however, cannot account for the large increase in the use of unsecured credit during this period. I explain the simultaneous...

A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to evaluate the 2005 bankruptcy law reform and other counterfactual reforms. The calibrated model indicates that the 2005 bankruptcy reform achieves its goal of reducing the number...

Several studies attributed the rise of household bankruptcy in the past two decades to the decline of social stigma associated with default. Stigma explanations, however, cannot account for the increase of credit availability during this period. I try to explain both of these facts as a result...

We use data from several waves of the Survey of Consumer Finances to document credit and debit card ownership and use across US demographic groups. We then present recent theoretical and empirical contributions to the study of credit and debit card behavior. Utilization rates of credit lines and...