Data and Code for "Liquidity vs. Wealth in Household Debt Obligations: Evidence from Housing Policy in the Great Recession"

Principal Investigator(s): View help for Principal Investigator(s) Peter Ganong, University of Chicago. Harris School of Public Policy; Pascal Noel, University of Chicago. Booth School of Business

Version: View help for Version V1

Name	File Type	Size	Last Modified
ConsAggShockModel.py	text/troff	31 KB	03/21/2020 06:50:PM
ConsAggShockModel_gn.py	text/troff	32.2 KB	03/21/2020 06:50:PM
ConsAggShockModel_sparse.py	text/troff	32.6 KB	03/21/2020 06:50:PM
ConsIndShockModel.py	text/troff	95.7 KB	03/21/2020 06:50:PM
ConsIndShockModel_gn.py	text/troff	96.6 KB	03/21/2020 06:50:PM
ConsMarkovModel.py	text/troff	49.7 KB	03/21/2020 06:50:PM
ConsPrefShockModel.py	text/troff	30.6 KB	03/21/2020 06:50:PM
ConsumerParameters.py	text/troff	9.9 KB	03/21/2020 06:50:PM
ConsumptionSavingModel.py	text/troff	87.6 KB	03/21/2020 06:50:PM
ConsumptionSavingModel_gn.py	text/troff	93.8 KB	03/21/2020 06:50:PM

Project Description

Summary:

We exploit variation in mortgage modifications to disentangle the impact of reducing long-term obligations with no change in short-term payments (“wealth”), and reducing short-term payments with no change in long-term obligations (“liquidity”). Using re- gression discontinuity and difference-in-differences research designs with administrative data measuring default and consumption, we find that principal reductions that increase wealth without affecting liquidity have no effect, while maturity extensions that increase only liquidity have large effects. This suggests that liquidity drives default and consump- tion decisions for borrowers in our sample and that distressed debt restructurings can be redesigned with substantial gains to borrowers, lenders, and taxpayers.

Scope of Project

JEL Classification:
      D14 Household Saving; Personal Finance
      E60 Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
      G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
      R28 Urban, Rural, Regional, Real Estate, and Transportation Economics: Government Policy

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Published Versions

V1 [2020-09-23]

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