 Debt Overhang and Deleveraging in the US Household Sector: Gauging the Impact on ConsumptionBruno Albuquerque and Georgi Krustev Review of Income and Wealth, 2018, vol. 64, issue 2, 459-481 Abstract: Using a novel data set for the U.S. states, this paper examines whether household debt and the protracted debt deleveraging help explain the dismal performance of U.S. consumption since 2007 in the aftermath of the housing bubble. By separating the concepts of deleveraging and debt overhang—a flow and a stock effect—we find that excessive indebtedness exerted a meaningful drag on consumption over and beyond wealth and income effects. The overall effect, however, is modest—†around one sixth of the slowdown in consumption between 2000–06 and 2007–12—and mostly driven by states with particularly large imbalances in their household sector. This might be indicative of non†linearities, whereby indebtedness begins to bite only when misalignments from sustainable debt dynamics become excessive. Date: 2018 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:revinw:v:64:y:2018:i:2:p:459-481 Ordering information: This journal article can be ordered from Access Statistics for this article Review of Income and Wealth is currently edited by Conchita D'Ambrosio and Robert J. Hill More articles in Review of Income and Wealth from International Association for Research in Income and Wealth Contact information at EDIRC. |
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