The rise and fall of consumption in the '00s
The major portion of U.S. gross domestic product (GDP) is accounted for by consumer spending, which significantly affects the business cycle. Consumer demand has been extremely volatile since 2000, especially given the booms and busts in housing values and in subprime mortgage lending. While it is well-established that housing net worth, credit availability, and household debt levels help to explain changes in consumer spending, the roles played by other potential determinants of consumption are not well identified or understood. This paper uses county-level data and a multiple-regression ...
Monetary policy and regional house-price appreciation
This paper examines the link between monetary policy and house-price appreciation by exploiting the fact that monetary policy is set at the national level, but has different effects on state-level activity in the United States. This differential impact of monetary policy provides an exogenous source of variation that can be used to assess the effect of monetary policy on state-level housing prices. Policy accommodation equivalent to 100 basis points on an equilibrium real federal funds rate basis raises housing prices by about 2.5 percent over the next two years. However, the estimated effect ...
Keeping the house or moving for a job
Some reports have suggested that employers can?t fill job openings in some places because they can?t entice workers to move. Workers won?t move, so the story goes, when doing so will mean losing money on their homes, and this is the case for many homeowners since the housing crash. But new research shows that homeowners will move when they have a better job offer, even if they will lose money on their home when they sell it.
Consumption, credit, and the missing young
There are more young adults today with either no credit history or insufficient credit history to be scored by one of the major credit bureaus than there were before the Great Recession ? a reality that is likely an unintended outcome of the CARD Act of 2009. In regressions that include a rich set of controls, this paper shows that measures of young adults missing from credit bureau data act as a drag on state-level consumption growth. This finding seems to be driven by young individuals from more disadvantaged backgrounds having less access to credit since the act went into effect.
COVID-19 and the Labor Market Outcomes for Prime-Aged Women
This paper documents labor market outcomes for prime-aged women relative to those for prime-aged men since the COVID-19 pandemic officially started. The pandemic-induced recession has played out very differently compared with previous recessions, with women initially losing jobs at higher rates than men. While the pandemic has been hard for everybody, it has resulted in a widening of the gender gaps in employment and labor force participation of roughly 2 percentage points. The gaps grew initially due to occupation distribution differences across genders as well as school closings. Women ...
The credit card debt puzzle: the role of preferences, credit risk, and financial literacy
We use the 1979 National Longitudinal Survey of Youth to revisit what is termed the credit card debt puzzle: why consumers simultaneously co-hold high-interest credit card debt and low-interest assets that could be used to pay down this debt. This dataset contains unique information on intelligence, financial literacy, and preferences, while also providing a complete picture of households? balance sheets. Relative to individuals with no credit card debt but positive liquid assets, individuals in the puzzle group have higher discount rates, slightly lower financial literacy scores, and very ...
Household formation over time: evidence from two cohorts of young adults
This paper analyzes household formation in the United States using data from two cohorts of the national Longitudinal Survey of Youth (NLSY)?the 1979 cohort and the 1997 cohort. The analysis focuses on how various demographic and economic factors impact household formation both within cohorts and over time across cohorts. The results show that there are substantial differences over time in the share of young adults living with their parents. Differences in housing costs and business-cycle conditions can explain up to 70 percent of the difference in household-formation rates across cohorts. ...
The Mortgage Cash Flow Channel of Monetary Policy Transmission: A Tale of Two Countries
We study the mortgage cash flow channel of monetary policy transmission under fixed-rate mortgage (FRM) versus adjustable-rate mortgage (ARM) regimes by comparing the United States with primarily long-term FRMs and Spain with primarily ARMs that automatically reset annually. We find a robust transmission of mortgage rate changes to spending in both countries but surprisingly a larger effect in the United States—and provide two explanations for this finding. First, there are channels of transmission other than the mortgage cash flow effect since other interest rates co-move with the mortgage ...
Moving to a job: The role of home equity, debt, and access to credit
Using credit report data from two of the three major credit bureaus in the United States, we infer with high certainty whether households move to other labor markets defined by metropolitan areas. We estimate how moving patterns relate to labor market conditions, personal credit, and homeownership using panel regressions with fixed effects which control for all constant individual-specific traits. We interpret the patterns through simulations of a dynamic model of consumption, housing, and location choice. We find that homeowners with negative home equity move more than other homeowners, in ...
Sectoral inflation and the Phillips curve: what has changed since the Great Recession?
Using sectoral data at a medium level of aggregation, we find that price changes became less responsive to aggregate unemployment around 2009?2010. The slopes of the disaggregated Phillips curves diminished in many sectors, including housing and some services. We also document a decrease in sectoral inflation persistence, suggesting an increase in the weight of the forward-looking inflation expectation component and a decrease in the weight of the backward-looking component.