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SUMMARY:Bank Intermediation and Consumer Bankruptcy - Anne Villamil (Henry
  B. Tippie College of Business\, the University of Iowa)
DTSTART:20200123T130000Z
DTEND:20200123T140000Z
UID:TALK131245@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:Abstract. How does bankruptcy protection affects household bal
 ance sheet adjustments and aggregate consumption when credit tightens? We 
 analyze the aggregate dynamics in household deleveraging and consumption i
 n model in which households can default on unsecured credit. There is trad
 e-off between a beneficial insurance and negative creditworthiness effects
 . When credit tightens\, we find that: (i) Consumers decrease new borrowin
 g and may default on existing credit\, resulting in deleveraging and a dro
 p in aggregate consumption with important selection effects due to change
 s in the composition of borrowers. (ii) Consumption and welfare reductions
  are especially harsh for poor households. (iii) Bankruptcy costs lead to 
 a drop in aggregate consumption on impact\, and exclusion from the credit 
 market reduces the ability to smooth implying a slower recovery. The 2005 
 BAPCPA reform made filing for bankruptcy more difficult\, and we find that
  it worsened the negative effects of credit tightening on aggregate consum
 ption and welfare.
LOCATION:Upper Hall\, Peterhouse College\, Cambridge  CB2 1RD
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