TY - JOUR AU - Chakrabarti, Rajashri AU - Lee, Donghoon AU - van der Klaauw, Wilbert AU - Zafar, Basit TI - Household Debt and Saving During the 2007 Recession JF - National Bureau of Economic Research Working Paper Series VL - No. 16999 PY - 2011 Y2 - April 2011 DO - 10.3386/w16999 UR - http://www.nber.org/papers/w16999 L1 - http://www.nber.org/papers/w16999.pdf N1 - Author contact info: Rajashri Chakrabarti Federal Reserve Bank of New York 33 Liberty St New York, NY 10045 E-Mail: Rajashri.Chakrabarti@ny.frb.org Donghoon Lee Federal Reserve Bank of New York 33 Liberty Street New York, NY 10045 Tel: 2127208699 E-Mail: donghoon.lee@ny.frb.org Wilbert H. van der Klaauw 33 Liberty Street Research and Statistics, Federal Reserve Bank NY New York, NY 10045 E-Mail: Wilbert.vanderklaauw@ny.frb.org Basit Zafar Department of Economics University of Michigan 611 Tappan Street Ann Arbor, Michigan 48109 E-Mail: basitak@gmail.com M1 - published as Rajashri Chakrabarti, Donghoon Lee, Wilbert van der Klaauw, Basit Zafar. "Household Debt and Saving during the 2007 Recession," in Charles R. Hulten and Marshall B. Reinsdorf, editors, "Measuring Wealth and Financial Intermediation and Their Links to the Real Economy" University of Chicago Press (2015) M3 - presented at "Conference on Research in Income and Wealth", November 12-13, 2010 AB - Using administrative credit report records and data collected through several special household surveys we analyze changes in household debt and savings during the 2007 recession. We find that while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they owned stocks and whether they had secure jobs, the crisis' impact appears to have been widespread, affecting large shares of households across all age, income and education groups. In response to their deteriorated financial situation, households reduced their average spending and increased saving. The latter increase - at least in 2009 - did not materialize itself through an increase in contributions to retirement and savings accounts. If anything, such contributions actually declined on average during that year. Instead, the higher saving rate appears to reflect a considerable decline in household debt, with households paying down mortgage debt in particular. At the end of 2009 individuals expected to continue to increase saving and pay down debt, which is consistent with what we have observed so far in 2010. In contrast, consumers were pessimistic about the availability of credit, with credit expected to become harder to obtain during 2010. ER -