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Macroeconomic Effects of Bankruptcy and Foreclosure Policies
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies. Stockholm Univ, Inst Int Econ Studies, SE-10691 Stockholm, Sweden.
Number of Authors: 1
2016 (English)In: The American Economic Review, ISSN 0002-8282, E-ISSN 1944-7981, Vol. 106, no 8, 2219-2255 p.Article in journal (Refereed) Published
Abstract [en]

I study the implications of two major debt-relief policies in the United States: the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the Home Affordable Refinance Program (HARP). To do so, I develop a model of housing and default that includes relevant dimensions of credit-market policy and captures rich heterogeneity in household balance sheets. The model also explains the observed cross-state variation in consumer default rates. I find that BAPCPA significantly reduced bankruptcy rates, but increased foreclosure rates when house prices fell. HARP reduced foreclosures by 1 percentage point and provided substantial welfare gains to households with high loan-to-value mortgages.

Place, publisher, year, edition, pages
2016. Vol. 106, no 8, 2219-2255 p.
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URN: urn:nbn:se:su:diva-134264DOI: 10.1257/aer.20120512ISI: 000380914200008OAI: diva2:1033941
Available from: 2016-10-10 Created: 2016-10-03 Last updated: 2016-10-10Bibliographically approved

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Mitman, Kurt
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