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"Household Wealth and Macroeconomic Activity: 2008--2013," Journal of Money, Credit and Banking, March-April 2017, 495-523.
pdf file.
published article, online.
published article, pdf file.

Abstract

This paper provides estimates of the effects of the fall in financial and housing wealth in 2008--2009 on overall macroeconomic activity. When the wealth losses are run through a structural macroeconometric model, it is estimated that the fall in wealth contributed about 2.1 percentage points to the rise in the unemployment rate in 2009 and about 3.3 points in 2010. The contribution to the fall in real GDP was 4.5 and 5.4 percent in the two years. These estimates account for most---but not all---of the recessionary increase in unemployment. The remaining increase in unemployment may have resulted more directly from financial stresses, but little evidence is found for this in this study.

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