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Changes in U.S. household balance sheet behavior after the housing bust and Great Recession: evidence from panel data

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  • Daniel H. Cooper

Abstract

This paper uses panel data through 2011 to examine evidence of shifts in household balance sheet behavior following the financial crisis and Great Recession. The paper considers evidence of balance sheet repair through debt repayment as well as changes in the composition of households? balance sheets and/or saving decisions to determine whether households? desire for holding or investing in riskier versus safer assets has changed. The data show relatively small and limited balance sheet adjustment?especially for those households considered the most likely to have been impacted by the economic collapse. The adjustment that did occur typically raised households? liquid asset holdings and/or saving and reduced their risky asset positions (stocks). There is also some evidence of increased nonhousing debt repayment and slower takeup of new nonhousing debt. Overall, the findings are inconsistent with major adjustments occurring in households? balance sheet behavior?especially to the extent where these shifts would have contributed substantially to the sluggish economic recovery

Suggested Citation

  • Daniel H. Cooper, 2013. "Changes in U.S. household balance sheet behavior after the housing bust and Great Recession: evidence from panel data," Public Policy Discussion Paper 13-6, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbpp:13-6
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    References listed on IDEAS

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    1. Daniel H. Cooper, 2012. "U.S. household deleveraging: what do the aggregate and household-level data tell us?," Public Policy Brief, Federal Reserve Bank of Boston.
    2. Meta Brown & Andrew F. Haughwout & Donghoon Lee & Wilbert Van der Klaauw, 2013. "The financial crisis at the kitchen table: trends in household debt and credit," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 19(April).
    3. John Carter Braxton & Edward S. Knotek, 2012. "What drives consumer debt dynamics?," Economic Review, Federal Reserve Bank of Kansas City, vol. 97(Q IV).
    4. F. Thomas Juster & Joseph P. Lupton & James P. Smith & Frank Stafford, 2006. "The Decline in Household Saving and the Wealth Effect," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 20-27, February.
    5. Atif Mian & Kamalesh Rao & Amir Sufi, 2013. "Household Balance Sheets, Consumption, and the Economic Slump," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1687-1726.
    6. Bostic, Raphael & Gabriel, Stuart & Painter, Gary, 2009. "Housing wealth, financial wealth, and consumption: New evidence from micro data," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 79-89, January.
    7. Markus K. Brunnermeier & Stefan Nagel, 2008. "Do Wealth Fluctuations Generate Time-Varying Risk Aversion? Micro-evidence on Individuals," American Economic Review, American Economic Association, vol. 98(3), pages 713-736, June.
    8. Daniel Cooper, 2013. "House Price Fluctuations: The Role of Housing Wealth as Borrowing Collateral," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1183-1197, October.
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    Cited by:

    1. Terri Friedline & Robert Hughes & Paul Johnson, 2014. "Toward Healthy Balance Sheets: Are Savings Accounts a Gateway to Young Adults’ Asset Diversification and Accumulation?," Review, Federal Reserve Bank of St. Louis, vol. 96(4), pages 359-389.
    2. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2014. "The Great Recession, Decline and Rebound in Household Wealth for the Near Retirement Population," NBER Working Papers 20584, National Bureau of Economic Research, Inc.
    3. Carlos Garriga & Aaron Hedlund, 2019. "Crises in the Housing Market: Causes, Consequences, and Policy Lessons," Working Papers 2019-33, Federal Reserve Bank of St. Louis.

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    Keywords

    Households - Economic aspects; Saving and investment;

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