Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297433 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2023-48
Publisher: 
Bank of Canada, Ottawa
Abstract: 
I study debt relief as a stimulus policy using a dynamic stochastic general equilibrium model that captures the rich heterogeneity in households' balance sheets. In this environment, a large-scale mortgage principal reduction can amplify a recovery, support house prices and lower foreclosures. The nature of the intervention, in terms of its eligibility, liquidity and financing, shapes its macroeconomic impact. This impact rests on how resources are redistributed across households that vary in their marginal propensities to consume. The availability of bankruptcy on unsecured debt quantitatively changes the macroeconomic response to large-scale mortgage relief by reducing precautionary savings.
Subjects: 
Business fluctuations and cycles
Debt management
Housing
Credit and creditaggregates
JEL: 
E21
E32
E6
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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