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A Closer Look at the Fed’s Balance Sheet Accounting
An earlier post on how the Fed changes the size of its balance sheet prompted several questions from readers about the Federal Reserve?s accounting of asset purchases and the payment of principal by the Treasury on Treasury securities owned by the Fed. In this post, we provide a more detailed explanation of the accounting rules that govern these transactions.
The Causes of Household Bankruptcy: The Interaction of Income Shocks and Balance Sheets
We examine how household balance sheets and income statements interact to affect bankruptcy decisions following an exogenous income shock. For identification, we exploit government payments in one but not any other Canadian province that varied exogenously based on family size. Receiving a larger income shock from the payment (relative to household income) reduces the count of bankruptcies, with fewer remaining filers having higher net balance sheet benefits of bankruptcy (unsecured debt discharged minus liquidated assets forgone). Receiving an income shock thus causes households that would ...