scholarly journals HOUSING CHOICES AND THEIR IMPLICATIONS FOR CONSUMPTION HETEROGENEITY

2021 ◽  
pp. 1-20
Author(s):  
Eva de Francisco
Keyword(s):  
Transaction Costs ◽  
Great Recession ◽  
Borrowing Constraints ◽  
Empirical Literature ◽  
Income Shocks ◽  
Stylized Facts ◽  
Net Worth ◽  
Aggregate Consumption ◽  
The Great Recession ◽  
Significant Size

This paper proposes a model to jointly explain two stylized facts observed in the recent empirical literature—the existence of a significant size of wealthy hand-to-mouth consumers and negative marginal propensities to consume associated with housing upgrades. The key ingredients of the model are a realistic set of housing choices, sizable down payment requirements, transaction costs, and endogenous borrowing constraints. Moreover, in the presence of unanticipated income shocks, this richness in marginal propensities to consume has significant implications for aggregate consumption and helps explain the puzzling increase in savings by low net worth households observed during the Great Recession as well as the consumption responses to recent tax rebates.

Introduction

2017 ◽  
Author(s):  
Stefan Homburg
Keyword(s):  
Great Recession ◽  
Rational Expectations ◽  
Borrowing Constraints ◽  
Distinctive Features ◽  
Net Worth ◽  
The Great Recession ◽  
External Finance ◽  
International Audience ◽  
Aims And Scope

Chapter 1 describes the book’s aims and scope. The main objective is to improve understanding of the Great Recession and its aftermath. The book provides a unified theoretical framework that uses dynamic general equilibrium models, or DGE, but dispenses with the rational expectations assumption. Its distinctive features are clean models with a rich institutional structure encompassing credit money, external finance, borrowing constraints, net worth, real estate, and commercial banks. Written for economists in universities, governments, and financial institutions, the book addresses an international audience.

Real Estate

2017 ◽  
Author(s):  
Stefan Homburg
Keyword(s):  
Real Estate ◽  
Great Recession ◽  
House Prices ◽  
Borrowing Constraints ◽  
Macroeconomic Models ◽  
Land Prices ◽  
The Great Recession ◽  
Quantitative Importance

Chapter 6 examines real estate as a neglected feature of actual economies. It begins with an empirical overview demonstrating the preeminent role of land as a part of nonfinancial wealth. Whereas many macroeconomic models represent nonfinancial wealth by a symbol K that is interpreted as machines and equipment (if not robots), the text makes clear that such items are of minor quantitative importance. In contemporary economies, nonfinancial wealth consists chiefly of real estate. This is the proper reason so many analysts conjecture a link between house prices and the Great Recession. Changes in house prices (primarily changes in land prices) operate on the economy through their influence on nonfinancial wealth. Nonfinancial wealth affects consumption directly and investment indirectly since it relaxes or tightens borrowing constraints. Building on the results obtained in previous chapters, the text studies housing manias and leverage cycles and relates its main findings to US data.

Disparate Recoveries: Wealth, Race, and the Working Class after the Great Recession

2021 ◽  
Vol 695 (1) ◽  
pp. 173-192
Author(s):  
Fenaba R. Addo ◽  
William A. Darity
Keyword(s):  
Middle Class ◽  
Working Class ◽  
Great Recession ◽  
Wealth Inequality ◽  
Net Worth ◽  
The Great Recession ◽  
Consumer Finances ◽  
White Working Class ◽  
Using Data ◽  
The Relationship

What does it mean to be working class in a society of extreme racial wealth inequality? Using data from the Survey of Consumer Finances, we investigate the wealth holdings of Black, Latinx, and white working-class households during the post–Great Recession (pre–COVID-19) period that spanned 2010 to 2019. We then explore the relationship between working-class and middle-class attainment using a wealth-based metric. We find that, in terms of their net worth, fewer Black working-class households benefitted from the economic recovery than white working-class households. Among white households, the working class saw the greatest increase in wealth in both absolute and relative terms. Working-class households were less likely to be middle class as defined by their wealth holdings, and Black and Latinx households were also less likely to be middle class. For Black households, racial identity is a stronger predictor of wealth attainment than occupational sector.

Local Economic Conditions and Fertility from the Great Depression through the Great Recession

2020 ◽  
Vol 110 ◽  
pp. 236-240
Author(s):  
Jessamyn Schaller ◽  
Price Fishback ◽  
Kelli Marquardt
Keyword(s):  
Great Recession ◽  
Data Model ◽  
The United States ◽  
Dynamic Responses ◽  
Economic Conditions ◽  
Income Shocks ◽  
Entire Sample ◽  
The Great Recession ◽  
The Great Depression ◽  
Per Capita

This paper reexamines the association between local economic conditions and fertility using a new dataset of county-level birthrates and per capita income in the United States spanning the period 1937-2016. Using a panel data model, we estimate that growth in local income is positively associated with birthrates over our entire sample period and that the strength of that association peaked during the 1960-1990 period and has declined in recent decades. We additionally estimate dynamic responses to local income shocks, finding that birthrates remain elevated for up to four years after a shock.

Factors Associated With Hiring and Firing Financial Advisors During the Great Recession

2019 ◽  
Vol 30 (2) ◽  
pp. 289-303
Author(s):  
Yuanshan Cheng ◽  
Charlene M. Kalenkoski ◽  
Philip Gibson
Keyword(s):  
Great Recession ◽  
Financial Services ◽  
Significant Loss ◽  
Economic Downturn ◽  
Financial Advisors ◽  
Net Worth ◽  
The Great Recession ◽  
Financial Advisor ◽  
Client Relationship ◽  
Hiring And Firing

From 2007 to 2009, the U.S. economy went through a deep economic downturn which is popularly known as the Great Recession. It resulted in a significant loss of wealth for many investors. While some investors sought the advice of financial advisors; others did not. This study examines the economic situation of households using the National Longitudinal Survey of Youth (NLSY) and analyzes the financial advisor–client relationship during the Great Recession to determine who fired or hired a financial advisor during this period. The results indicate that losing money, measured by a decrease net worth, was not the main reason why clients fired their financial advisor during the Great Recession. Interestingly, the results also show that experiencing a decrease in net worth was not the main reason why individuals pursued the services of a financial adviser during this period. Instead, current income and an increase in income were the primary factors that impacted the client–advisor relationship during the financial crisis. These results are consistent with consumer demand theory in which financial services are a normal good that people purchase less of when their income falls.

Constrained Credit

2017 ◽  
Author(s):  
Stefan Homburg
Keyword(s):  
Interest Rates ◽  
Great Recession ◽  
Borrowing Constraints ◽  
Monetary Policies ◽  
The Great Recession ◽  
Credit Creation ◽  
Advanced Economies ◽  
Borrowing Constraint ◽  
Depth Analysis ◽  
Money Creation

Chapter 4 considers economies with borrowing constraints. This assumption is motivated by the observation that monetary expansions after the Great Recession did not entail inflation in the expected manner. At the same time, nominal and real interest rates tended to decline in many advanced economies. The text offers an in-depth analysis of credit crunches, liquidity traps, and interest rates at the zero lower bound and demonstrates that borrowing constraints help reconcile theory and evidence. According to the key insight, a binding borrowing constraint detaches money creation from credit creation. In this case, inflation ceases to be a monetary phenomenon, as in standard models, but becomes a credit phenomenon. This finding explains why expansionary monetary policies failed to produce inflation since the Great Recession.

Capital accumulation and economic growth after the Great Recession

2019 ◽  
pp. 24-46 ◽  
Author(s):  
Leonid M. Grigoryev ◽  
Ekaterina A. Makarova
Keyword(s):  
Economic Growth ◽  
Great Recession ◽  
Capital Accumulation ◽  
Slow Recovery ◽  
Stylized Facts ◽  
The Great Recession ◽  
Theoretical Approaches ◽  
Current Trends ◽  
Advanced Economies ◽  
Per Capita

The Great Recession in 2008—2009 and slow recovery after it became a significant challenge both for economic policy and theory, especially for economic growth studies. New circumstances have revealed new stylized facts, for instance, the decrease in growth rates and capital accumulation in advanced economies. The paper analyzes responses to and outcomes of the Great Recession for countries at different stages of development. The authors consider the investment impact on economic growth varying through seven clusters of countries, determined according to GDP (PPP) level per capita. An attempt has been made to reveal new stylized facts based on current trends and to revise some theoretical approaches to the analysis of economic growth.

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