Interesting NBER day paper on Credit Smoothing, or the idea that people will use more/request more credit as a response to negative income shocks. The paper finds, contrary to standard economic models, people spend less instead of utilizing more credit. https://www.nber.org/papers/w26354?utm_campaign=ntwh&utm_medium=email&utm_source=ntwg3">https://www.nber.org/papers/w2...
This is important for recession response. If people don& #39;t utilize credit, even when available, the government must do more to stimulate demand. This Brookings paper outlines one option, direct payments: https://www.brookings.edu/wp-content/uploads/2019/05/ES_THP_Sahm_web_20190506.pdf">https://www.brookings.edu/wp-conten...
which, if you think about it for five seconds, makes total sense. but every model used to evaluate policy assumes the opposite.
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