NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Household Leveraging and Deleveraging

Alejandro Justiniano, Giorgio E. Primiceri, Andrea Tambalotti

NBER Working Paper No. 18941
Issued in April 2013
NBER Program(s):   EFG   ME

U.S. households' debt skyrocketed between 2000 and 2007, and has been falling since. This leveraging (and deleveraging) cycle cannot be accounted for by the liberalization, and subsequent tightening, of credit standards in mortgage markets observed during the same period. We base this conclusion on a quantitative dynamic general equilibrium model calibrated using macroeconomic aggregates and microeconomic data from the Survey of Consumer Finances. From the perspective of the model, the credit cycle is more likely due to factors that impacted house prices more directly, thus affecting the availability of credit through a collateral channel. In either case, the macroeconomic consequences of leveraging and deleveraging are relatively minor, because the responses of borrowers and lenders roughly wash out in the aggregate.

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Document Object Identifier (DOI): 10.3386/w18941

Published: Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2015. "Household leveraging and deleveraging," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(1), pages 3-20, January. citation courtesy of

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