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Journal Article
Asset Diversification and Low Debt Are the Keys to Building and Maintaining Wealth
Greatly expanded access to home mortgages during the 1980s, 1990s, and 2000s appeared to make the American dream a reality for millions of families. Homeownership was attainable by many who, for the first time, were able to take out a mortgage with an extremely low or no down payment ? even if they had a blemished credit history or none at all. For those with access to their accumulated home equity through mortgage refinancing or other home-secured borrowing, as well as to other sources of credit, lack of available cash no longer meant that they had to delay making routine purchases, buying a ...
Briefing
Walmart Checking and Apple Savings: Different Motivations, Similar Outcomes?
Walmart and Apple have announced plans to offer traditional financial accounts. Walmart’s consumer checking account may advance financial inclusion by increasing account access to unbanked and underbanked consumers. Apple’s consumer savings account may change how credit card issuers offer rewards to their customers. Both offerings are likely to increase competition in the financial services industry, though whether they ultimately benefit consumers remains to be seen.
Newsletter
A Dollar’s Worth: Inflation Is Real
Understanding the reality of inflation can help consumers make decisions in personal finance. Learn more about inflation, how it’s measured, and how the inflation rate is calculated in the December 2021 issue of Page One Economics: Focus on Finance.
Working Paper
Designing Unemployment Insurance for Developing Countries
The high incidence of informality in the labor markets of middle-income economies challenges the provision of unemployment protection. We show that, despite informational frictions, introducing an unemployment insurance savings account (UISA) system may provide substantial benefits. This system improves welfare by providing insurance to the unemployed and creating incentives to work in the formal sector. The optimal scheme generates a reduction in unemployment (from 4 to 3 percent), an increase in formality (from 68 to 72 percent), and a rise in total output (by 4 percent). Overall, ...
Working Paper
Designing Unemployment Insurance for Developing Countries
The benefits of implementing Unemployment Insurance Savings Accounts (UISAs) are studied in the presence of the multiple sources of information frictions often existing in developing countries. A benchmark incomplete markets economy is calibrated to Mexico in the early 2000s. The unconstrained optimal allocation would imply very large welfare gains relative to the benchmark economy (similar to an increase in consumption of 23% in every period). More importantly, in presence of multiple sources of information frictions, about half of those potential gains can be accrued through the ...