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The risk of a recession period in the U.S. and the possible role of home equity

De Koning, Kees (2022): The risk of a recession period in the U.S. and the possible role of home equity.

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Abstract

The Bank of International Settlement in its latest report demonstrates how the inflation levels, especially of food and energy prices have affected the behaviour of households in the U.S and in other countries. This paper aims to set out a method to use home equity as a policy tool for the Federal Reserve.Home owners equity now far outstrips U.S. annual GDP level. During the Great Recession, households had no other option than to use private sector financing. In the paper it is demonstrated that such use was detrimental to household's interests. To avoid another Great Recession, the Fed might wish to take over this responsibility.

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