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Working Paper
The effect of sales tax holidays on household consumption patterns
Sales tax holidays (STHs) are the temporary suspension of state (and some local) sales taxes on selected retail items for a brief period of time. The policy has gained popularity in recent years, beginning in one state in 1997 and growing to twenty by 2008. Despite the increased frequency with which states use STHs, little research has been conducted to study how households respond to this temporary tax manipulation. Our paper offers the first household-level, microeconometric evaluation on the effect of STHs on household consumption patterns. We find that on STHs, households increase the ...
Journal Article
The relationship between leverage and household spending behavior: evidence from the 2007-2009 survey of consumer finances
Some recent studies suggest that high levels of household debt and leverage have contributed to the relatively sluggish growth of consumer spending in the past few years (Dynan, 2012; Mian, Rao, and Sufi, 2013). However, this conclusion has not been widely accepted because of the empirical challenges associated with identifying the relationship amid the dramatic and complicated changes in the household economic environment during the Great Recession and subsequent slow recovery. Leverage may indirectly influence spending by increasing borrowing constraints, impeding refinancing, and raising ...
Journal Article
Household financial stability: who suffered the most from the crisis?
The financial crisis and ensuing recession took a toll on just about everybody?s household wealth. Not surprisingly, the pain wasn?t evenly distributed. Those groups that are usually the most vulnerable in our society?young and middle-aged minority households?suffered the most, percentage-wise.
Journal Article
The current state of U.S. household balance sheets
The Board of Governors of the Federal Reserve System is responsible for two of the most widely used datasets containing information about U.S. household balance sheets: the quarterly macro-level Financial Accounts of the United States (FA, formerly known as the Flow of Funds Accounts) and the triennial microlevel Survey of Consumer Finances (SCF). The FA is very timely, but the data can be used only to describe the household sector as a whole. The SCF provides the micro-level detail needed to capture heterogeneity in household finances, but the data are available only with a long lag. The ...
Working Paper
Cognitive abilities and household financial decision making
We analyze the effects of cognitive abilities on two examples of consumer financial decisions where suboptimal behavior is well defined. The first example refers to consumers who transfer the entire balance from an existing credit card account to a new account, but use the new card for convenience transactions, resulting in higher interest charges. The second example refers to consumers who face higher APRs because they inaccurately estimate their property value on a home equity loan or line of credit application. We match individuals from the US military for whom we have detailed test scores ...
Journal Article
Is student debt jeopardizing the short-term financial health of U.S. households?
In this study, the authors use the Survey of Consumer Finances to determine whether student loans are associated with household net worth. They find that median 2009 net worth ($117,700) for households with no outstanding student loan debt is nearly three times higher than for households with outstanding student loan debt ($42,800). Further, multivariate statistics indicate that households with outstanding student loan debt and a median 2007 net worth of $128,828 incur a loss of about 54 percent of net worth in 2009 compared with households with similar net worth levels but no student loan ...
Report
After the fall : rebuilding family balance sheets, rebuilding the economy
Essay from the 2012 Annual Report.
Journal Article
The diverse impacts of the great recession
The Great Recession had a large negative impact on the U.S. economy. Asset prices, most notably stock and house prices, declined substantially, resulting in a loss in wealth for many American households. In this article, Makoto Nakajima documents how diverse households were affected in a variety of dimensions during the Great Recession, in particular between 2007 and 2009, using newly available data from the 2007-2009 Survey of Consumer Finances. He discusses why it is important to look at the data on households, rather than focusing on the aggregate data, and he reviews some recent studies ...
Journal Article
Household financial stress and home prices
Working Paper
Do financial counseling mandates improve mortgage choice and performance? Evidence from a legislative experiment
We explore the effects of mandatory third-party review of mortgage contracts on the terms, availability, and performance of mortgage credit. Our study is based on a legislative experiment in which the State of Illinois required ?high-risk? mortgage applicants acquiring or refinancing properties in 10 specific zip codes to submit loan offers from state-licensed lenders to review by HUD-certified financial counselors. We document that the legislation led to declines in both the supply of and demand for credit in the treated areas. Controlling for the salient characteristics of the remaining ...