How Should Unemployment Insurance Vary Over the Business Cycle?
In: FRB St. Louis Working Paper No. 2019-022
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In: FRB St. Louis Working Paper No. 2019-022
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Working paper
In: Economic Synopses, No. 23, 2022
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In: FRB St. Louis Working Paper No. 2021-4
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In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Band 55, Heft S1, S. 54-87
ISSN: 1540-5982
AbstractThis paper develops an agent‐based model to quantify the impact of COVID‐19 on household debt and savings. To build a representative cross‐section of households that vary by income, debt portfolios and consumption baskets, we merge data from the Survey of Household Spending and the Survey of Financial Security. We construct paths for consumption and employment over the crisis, accounting for heterogeneous risk of unemployment across demographics, government transfers, and substitution between expenditure categories that vary in contact intensity. Our model simulations yield a heterogeneous effect of COVID‐19 across the income distribution. Low‐income households face the highest risk of unemployment, but transfers provide generous income replacement. Middle‐income job losers see the fastest rise in debt because transfers only partially replace lost income. Most unplanned savings are accumulated by high‐income households that face lower risk of unemployment and larger declines in hard‐to‐distance spending. We find the rise in savings could generate a brief jump of nearly 6% of monthly consumption.
In: FRB St. Louis Working Paper No. 2020-23
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This paper develops an agent-based modelling approach to quantify the impact of COVID-19-induced economic disruptions on household debt and unplanned savings over 2020. We merge data from the Survey of Financial Security and the Survey of Household Spending to construct a representative cross-section of households who vary in their income, debt portfolios and mix of consumption expenditures. We simulate a series of individual and aggregate shocks to household income and consumption expenditures that incorporate government policies such as Canadian Emergency Response Benefit (CERB) as well as shifts in consumption expenditures across hard-to -distance goods (e.g., travel, restaurants) and easy-to -distance goods (e.g., groceries). Differential impact on household incomes resulting from unemployment and reduced hours play an important role in driving household debt and savings. We highlight two other important channels. First, income replacement programs (notably CERB) only partially replace lost income for unemployed, previously middle-income households - which drives a rise in borrowing, particularly for those with mortgages. Second, upper-income households have relatively larger expenditures on hard-to-distance goods and so experience larger declines in consumption expenditures. This contributes to the high savings observed during March and April.
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In: FRB St. Louis Working Paper No. 2022-16
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In: FRB of New York Staff Report No. 943
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In: NBER Working Paper No. w26063
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In: NBER Working Paper No. w26063
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