Study finds mild credit cy­cle in NY

The Pak Banker - - Front Page -


A re­cent New York Fed study shows that the New York-North­ern New Jersey re­gion ex­pe­ri­enced a rel­a­tively mild credit cy­cle com­pared with the na­tion as a whole, although pock­ets of fi­nan­cial stress ex­ist.

In their study, econ­o­mists Jaison Abel and Richard Deitz ex­am­ine the in­crease and de­cline in house­hold debt over the re­cent credit cy­cle for ar­eas in the New York-North­ern New Jersey re­gion. The au­thors be­gin their anal­y­sis by ex­am­in­ing the rapid in­crease in U.S. house­hold debt that oc­curred over the 2000s, and show that the places that ac­cu­mu­lated the most debt tended to be ar­eas where the hous­ing boom was strong­est. With the on­set of the Great Re­ces­sion and fi­nan­cial cri­sis, house­hold fi­nances came un­der in­creas­ing pres­sure, and house­holds be­gan a process of delever­ag­ing.

In the New York-North­ern New Jersey re­gion, house­hold debt lev­els gen­er­ally did not rise as rapidly as the U.S. av­er­age, though in some places, debt bur­dens reached par­tic­u­larly high lev­els. In ad­di­tion, the delever­ag­ing process, while sig­nif­i­cant, has been less pro­nounced in the re­gion than in other parts of the coun­try. None­the­less, the au­thors also show that fi­nan­cial stress.

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