2 Works

Debt Overhang and Deleveraging in the US Household Sector: Gauging the Impact on Consumption

Bruno Albuquerque & Georgi Krustev
Using a novel dataset for the US states, this paper examines whether household debt and the protracted debt deleveraging help explain the dismal performance of US consumption since 2007, in the aftermath of the housing bubble. By separating the concepts of deleveraging and debt overhang—a flow and stock effect—we find that excessive indebtedness exerted a meaningful drag on consumption over and beyond income and wealth effects. The overall impact, however, is modest, around one-sixth of...

Price Level Targeting in a Small Open Economy with Financial Frictions: Welfare Analysis

Ali Dib, Caterina Mendicino & Yahong Zhang
How important are the benefits of low price-level uncertainty? This paper explores the desirability of price-level path targeting in an estimated DSGE model fit to Canadian data. The policy implications are based on social welfare evaluations. Compared to the historical inflation targeting rule, an optimal price level targeting regime substantially reduces the welfare cost of business cycle fluctuations in terms of steady state consumption. The optimal price-level targeting rule performs also better than the optimal...

Registration Year

  • 2021

Resource Types

  • Text


  • Banco de Portugal
  • European Central Bank
  • Bank of Canada