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Alejandro Justiniano, FRB Chicago Print
Tuesday, 27 November 2012, 14:00 - 15:15

Alejandro Justiniano, Federal Reserve Bank Chicago

Household Leveraging and Deleveraging

Abstract. 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.

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