Personal-bankruptcy cycles

Document Type

Review

Publication Title

Macroeconomic Dynamics

Abstract

This paper estimates the dynamics of the personal-bankruptcy rate over the business cycle by exploiting large cross-state variation. We find that bankruptcy rates are significantly above trend during a recession and rise as a recession persists. After a recession ends, there is a hangover in which bankruptcy rates begin to fall but remain above trend for several more quarters. Recovery periods see a strong bounce-back effect, with bankruptcy rates significantly below trend for several quarters. Despite the significant increases in bankruptcies during recessions, the largest contributor to rising bankruptcies during these periods has tended to be the longstanding upward trend.

DOI

https://doi.org/10.1017/S1365100512001058

Publication Date

10-2014

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