Evaluating default policy: The business cycle matters

• 成果类型: Article
• 署名作者: Gordon, Grey
• 署名单位: Indiana University System; Indiana University Bloomington
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE372
• 发表日期: 2015
• 页码: 795-823
• 关键词: bankruptcy; LAW; consumer finance; business cycles; C68; D58; E21; E22; E32; E61; E65; K35

摘要

More debt forgiveness directly benefits households but indirectly makes credit more expensive. How does aggregate risk affect this trade-off? In a calibrated general equilibrium life-cycle model, aggregate risk reduces the welfare benefit of making default very costly when the costs are borne by all households at all times. The result does not necessarily extend to state-contingent policies. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 in particular generates a small welfare loss with or without aggregate risk.