TY  - JOUR
AU  - Campbell,Jeffrey R.
AU  - Hercowitz,Zvi
TI  - The Role of Collateralized Household Debt in Macroeconomic Stabilization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11330
PY  - 2005
Y2  - May 2005
UR  - http://www.nber.org/papers/w11330
L1  - http://www.nber.org/papers/w11330.pdf
N1  - Author contact info:
Jeffrey R. Campbell
Senior Economist
Economic Research Department
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604-1413
Tel: 312/322-6156
Fax: 312/322-2357
E-Mail: jcampbell@frbchi.org

Zvi Hercowitz
E. Berglas School of Economics
Tel Aviv University
Ramat-Aviv, Tel Aviv   69978
ISRAEL
Tel: NA
E-Mail: zvih@post.tau.ac.il
AB  - Market innovations following the financial reforms of the early 1980s relaxed collateral constraints on household borrowing. The present paper examines the contribution of this development to the macroeconomic stabilization that occurred shortly thereafter. The model combines collateral constraints on households with heterogeneity of thrift in a calibrated general equilibrium setup. We use this tool to characterize the business cycle implications of lowering required down payments and rates of amortization for durable goods purchases as in the early 1980s. The model predicts that this relaxation of collateral constraints can explain a large fraction of the actual volatility decline in hours worked, output, household debt, and household durable goods purchases.
ER  -