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PERSONAL-BANKRUPTCY CYCLES

Published online by Cambridge University Press:  11 March 2013

Thomas A. Garrett  and
Howard J. Wall
Thomas A. Garrett
Affiliation:
University of Mississippi
Howard J. Wall*
Affiliation:
ISEE, Lindenwood University
*
Address correspondence to: Howard J. Wall, ISEE, School of Business and Entrepreneurship, Lindenwood University, 209 S. Kingshighway, St. Charles, MO 63301, USA; e-mail: [email protected].
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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.

Keywords

Personal BankruptcyRecessions
Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 7 , October 2014 , pp. 1488 - 1507
Copyright
Copyright © Cambridge University Press 2013 

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