Greater inequality and household borrowing? New evidence from household data

Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak, John Mondragon 29 January 2014

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The financial crisis of 2008–09 was preceded by an exceptional rise in borrowing by US households, accounted for primarily by a rise in mortgage debt. There are two main views about the source of this ‘great leveraging’:

  • The rise in borrowing reflected ‘credit supply’ factors.

Proponents point to progress in information technology (Sanchez 2009) and rising financialisation of debt (especially mortgages) as increasing the supply of credit, particularly to low-income and high-risk households (Drozd and Serrano-Padial 2013).

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Topics:  Financial markets Poverty and income inequality

Tags:  US, Inequality, debt, credit rationing, subprime mortgage crisis