Liquidity versus Wealth in Household Debt Obligations: Evidence from Housing Policy in the Great Recession

• 成果类型: Article
• 署名作者: Ganong, Peter; Noel, Pascal
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer20181243
• 发表日期: 2020
• 页码: 3100-3138
• 关键词: negative equity; consumption evidence; Home equity; mortgage; credit; prices; securitization; unemployment; expenditure; constraints

摘要

We exploit variation in mortgage modifications to disentangle the impact of reducing long-term obligations with no change in short-term payments (wealth), and reducing short-term payments with no change in long-term obligations (liquidity). Using regression discontinuity and difference-in-differences research designs with, administrative data measuring default and consumption, we find that principal reductions that increase wealth without affecting liquidity have no effect, white maturity extensions that increase only liquidity have large effects. This suggests that liquidity drives default and consumption decisions for borrowers in our sample and that distressed debt restructurings can be redesigned with substantial gains to borrowers, lenders, and taxpayers.