Welfare implications of the transition to high household debt

• 成果类型: Article
• 署名作者: Campbell, Jeffrey R.; Hercowitz, Zvi
• 署名单位: Tel Aviv University; Federal Reserve System - USA; Federal Reserve Bank - Chicago; National Bureau of Economic Research
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2008.09.002
• 发表日期: 2009
• 页码: 1-16
• 关键词: Financial deregulation; Mortgage debt; Interest rates

摘要

Aggressive deregulation of the mortgage market in the early 1980s triggered innovations that greatly reduced indebted households' required home equity, and a borrowing surge followed. This paper uses a calibrated general equilibrium model of lending from the wealthy to the middle class to evaluate the welfare effects of this reform quantitatively. We find that the indirect effects of endogenous interest rate and other relative price changes dominate the direct effect of relaxing the constraint. The borrowing household's welfare falls even though the reform directly relaxes a constraint on its trade. The saving household's welfare rises substantially. (C) 2008 Elsevier B.V. All rights reserved.