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We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt...
Persistent link: https://www.econbiz.de/10011430780
We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt...
Persistent link: https://www.econbiz.de/10011346295
We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt...
Persistent link: https://www.econbiz.de/10011347156
This paper develops a notion of consumer confidence within a dynamic competitive equilibrium framework. In any situation where multiple equilibrium prices on next‐period spot markets are equally supported by the state of the economy, confidence is encoded in the subjective probabilities...
Persistent link: https://www.econbiz.de/10011994753
Persistent link: https://www.econbiz.de/10011717157
This chapter reviews empirical estimates of differential income and consumption growth across individuals during recessions. Most existing studies examine the variation in income and consumption growth across individuals by sorting on ex ante or contemporaneous income or consumption levels. We...
Persistent link: https://www.econbiz.de/10014024289
We develop an incomplete-markets heterogeneous agent New-Keynesian (HANK) model in which households are allowed to lend and borrow, subject to a borrowing constraint. We show that, in this framework, forward guidance, that is the promise by the central bank to lower future interest rates, can be...
Persistent link: https://www.econbiz.de/10012126207
1. This research examines the potential impact of the stock market crash of 2008-2009 on U.S. working households. The Great Recession caused financial problems for many households in terms of unemployment, business losses, and decreases in real estate values, but the broadly based decreases in...
Persistent link: https://www.econbiz.de/10012903701
With a binding effective lower bound on interest rates and large government deficits, conventional policies are unviable and policymakers resort to unconventional policies, which target households' expectations directly. Using unique micro data and a difference-in-differences strategy, we assess...
Persistent link: https://www.econbiz.de/10012848266
Managing households' expectations directly is a novel policy tool to stimulate the economy by lowering the incentives to save, but so far policies based on this idea have been barely effective. We argue that simplicity is a crucial and yet neglected feature of effective policies that target...
Persistent link: https://www.econbiz.de/10012864441