High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household...

This paper investigates how the transmission of monetary policy to the real economy depends on the distribution of household debt. Using an original loan-level dataset covering the universe of UK mortgages, we assess the effect of monetary shocks on aggregate consumption by exploiting time...

This paper studies the effects of household liquidity constraints on individual labor market outcomes by exploiting a mortgage reform in Denmark in 1992, which for the first time allowed homeowners to borrow against housing equity for non-housing purposes. We find that following the reform,...

Using detailed Danish micro-data, we study how a credit-driven boom in consumer demand affects firm dynamics. We exploit the introduction of interest-only mortgages in 2003 to estab- lish a structural break in Danish households' spending capacity. A difference-in-differences approach indicates...

This paper studies the role of moral hazard and liquidity in driving household bankruptcy. First, I estimate that increases in potential debt forgiveness have a positive, but small, effect on filing using a regression kink design. Second, exploiting quasi-experimental variation in mortgage...

We document that the interest rate response to fiscal stimulus (IRRF) is lower in countries with high inequality or high household debt. To interpret this evidence we develop a model in which households take on debt to maintain a consumption threshold (saving constraint). Now debt-burdened,...

We measure aggregate productivity loss due to credit market constraints in a model with endogenous borrowing constraints, long-duration bonds, and costly equity payouts. Due to long-duration bonds, the model generates a realistic distribution of credit spreads. We structurally estimate our model...

We investigate which indicators of a firm's innovation activities are associated with financial constraints and analyse the nature and direction of causal links between innovation and financial constraints. By estimating simultaneous bivariate probit models on data from the UK Innovation...

We show that constraints can improve financial decision-making by disciplining behavioral biases. In financial markets, restrictions on leverage limit traders' ability to borrow to open new positions. We demonstrate that regulation which restricts the provision of leverage to retail traders...

This paper studies the dual impact of increased competition on aggregate output in a setting with both oligopolistic competition and financial constraints. In the absence of financial constraints, more competition unambiguously increases output by reducing markup levels, which increases...