Investigating the impact of auto loans on unemployment: The US experience
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Autoloans_US(REVISED).pdf
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2021-12-28
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Abstract
This paper explores the impact of automobile loan debt on US unemployment. Individuals with heterogeneous economic positions deem automobiles as important durable goods for unemployment exit and expected wage increases. The methodological approach makes use of an Autoregressive Distributed Lag (ARDL) Bound Testing modelling approach to document a negative and significant relationship between auto loans and unemployment. The results survive certain robustness tests, while they seem to confirm certain theoretical arguments posed in the literature, such as that the credit mechanism that dominates the transmission mechanism of monetary policy (credit shocks have a profound significant link with unemployment), while they seem to mitigate the role of alternative theories (where levered households suffer from a ‘debt overhang’ problem that distorts their preferences, making them demand high wages, and the ‘vacancy-posting’ effect) which imply that loans lead to high unemployment. The findings seem to provide significant recommendations to monetary policy makers on strengthening the banking services industry, providing an alternative to monetary policy for labour market intervention.Citation
Apergis, N., Apergis, E., and Young, W. (2020). 'Investigating the impact of auto loans on unemployment: The US experience'. Applied Economics, pp. 1-15.Publisher
Taylor & FrancisJournal
Applied EconomicsDOI
10.1080/00036846.2020.1789548Additional Links
https://www.tandfonline.com/toc/raec20/currentType
ArticleLanguage
enISSN
0003-6846EISSN
1466-4283ae974a485f413a2113503eed53cd6c53
10.1080/00036846.2020.1789548
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