Download this Paper Open PDF in Browser

The Microdynamics of Household Credit Use through a Boom-Bust Cycle

35 Pages Posted: 14 May 2014 Last revised: 10 Oct 2014

Fredrik Andersson

Office of the Comptroller of the Currency (OCC)

Tom Mayock

UNC Charlotte; Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Date Written: October 9, 2014

Abstract

In this paper we provide what we believe to be the first evidence on the nature of gross debt flows across consumers. We find that the aggregate dynamics in the consumer debt market are largely explained by the behavior of consumers with mortgage debt, and the behavior of such consumers is found to be sensitive to changes in housing market conditions. Our results show that there is a significant amount of consumer-level heterogeneity as evidenced by large amounts of simultaneous debt creation and debt destruction throughout the economic cycle. Finally, we find that there are important asymmetries in the debt adjustment process: whereas consumers are able to take on large amounts of additional debt quickly, short of defaulting debt is discharged very slowly. This slow deleveraging process may help explain why total consumer debt levels have been so slow to recover in the years following the Great Recession.

Keywords: Gross Credit Flows, Deleveraging, Finanical Crisis, Consumer Credit

JEL Classification: D14, E51, G01

Suggested Citation

Andersson, Fredrik and Mayock, Tom, The Microdynamics of Household Credit Use through a Boom-Bust Cycle (October 9, 2014). Available at SSRN: https://ssrn.com/abstract=2435966 or http://dx.doi.org/10.2139/ssrn.2435966

Per Fredrik Daniel Andersson (Contact Author)

Office of the Comptroller of the Currency (OCC) ( email )

400 7th St. SW
Washington, DC 20219-0001
United States
202-649-5528 (Phone)
571-465-3246 (Fax)

Tom Mayock

UNC Charlotte ( email )

Charlotte, NC 28223
United States

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th St Sw
Washington, DC 20219-0001
United States

Paper statistics

Downloads
26
Abstract Views
611