Household Debt and Saving During the 2007 Recession

67 Pages Posted: 15 Jan 2011

See all articles by Rajashri Chakrabarti

Rajashri Chakrabarti

Federal Reserve Bank of New York

Donghoon Lee

Federal Reserve Bank of New York; New York University

Wilbert van der Klaauw

Federal Reserve Bank of New York; IZA

Basit Zafar

Arizona State University

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2011

Abstract

Using credit report records and data collected from several household surveys, we analyze changes in household debt and saving during the 2007 recession. We find that, while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they owned stocks, and whether they had secure jobs, the crisis’ impact appears to have been widespread, affecting large shares of households across all age, income, and education groups. In response to their deteriorated financial situations, households reduced their average spending and increased their saving. This increase in saving - at least in 2009 - did not materialize through an increase in contributions to retirement and savings accounts. If anything, such contributions actually declined on average during that year. Instead, the higher saving rate appears to reflect a considerable decline in household debt, as households paid down mortgage debt in particular. At the end of 2009, individuals expected to continue increasing their saving and paying down of debt, which is consistent with what we have observed so far in 2013 In contrast, consumers were pessimistic about the availability of credit, expecting it to become harder to obtain during 2013.

Keywords: Household Debt and Saving, 2007 Recession, Credit Access, Mortgage Debt

JEL Classification: G01, D14, D12, D91

Suggested Citation

Chakrabarti, Rajashri and Lee, Donghoon and van der Klaauw, H. Wilbert and Zafar, Basit, Household Debt and Saving During the 2007 Recession (January 1, 2011). FRB of New York Staff Report No. 482. Available at SSRN: https://ssrn.com/abstract=1739824 or http://dx.doi.org/10.2139/ssrn.1739824

Rajashri Chakrabarti (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

HOME PAGE: http://nyfedeconomists.org/chakrabarti

Donghoon Lee

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-8699 (Phone)
212-720-1844 (Fax)

New York University

NY
United States

H. Wilbert Van der Klaauw

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5916 (Phone)
212-720-1844 (Fax)

IZA ( email )

Basit Zafar

Arizona State University ( email )

WP Carey School of Business, ASU
Tempe, AZ 85287
United States
9179326564 (Phone)

HOME PAGE: http://https://sites.google.com/site/basitakzafar/

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