For most homeowners, housing is the single most important component of their nonpension wealth. Therefore, a change in house prices greatly affects the total wealth of many households. Furthermore, movements in house prices can affect people’s lives indirectly. For example, the surge in the...

Is the observed large increase in consumer indebtedness since 1970 beneficial for U.S. consumers? This paper quantitatively investigates the macroeconomic and welfare implications of relaxing borrowing constraints using a model with preferences featuring temptation and self-control. The model...

Most people have probably heard of reverse mortgage loans. But even though these loans have been getting more attention lately, it’s possible that many people still aren’t sure about what reverse mortgages really are. This is not surprising, since reverse mortgages are a relatively new type...

The Great Recession had a large negative impact on the U.S. economy. Asset prices, most notably stock and house prices, declined substantially, resulting in a loss in wealth for many American households. In this article, Makoto Nakajima documents how diverse households were affected in a variety...

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...

Extensions of unemployment insurance (UI) benefits have been implemented in response to the Great Recession. This paper measures the effect of these extensions on the unemployment rate using a calibrated structural model featuring job search and consumption-saving decisions, skill depreciation,...

Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. In spite of growth in this market, only 2.1% of eligible homeowners had RMLs in 2011. In this paper, we analyze reverse mortgages in a life-cycle model of retirement, calibrated to age-asset...

The Patient Protection and Affordable Care Act (ACA) requires all individuals to have health insurance, and introduces penalties to large firms that do not offer affordable coverage to their employees. While the possible effects of the ACA on the insurance decision of individuals have been...

Reverse mortgages allow elderly homeowners with limited income or financial wealth to borrow against their housing wealth without downsizing or selling out and becoming a renter. Although the proportion of elderly homeowners using reverse mortgages has been increasing rapidly, only 1.4 percent...

We build a New Keynesian model in which heterogeneous workers differ with regard to their employment status due to search and matching frictions in the labor market, their potential labor income, and their amount of savings. We use this laboratory to quantitatively assess who stands to win or...