Importantly, and in line with established empirical evidence, it turns out that while the intertemporal substitution effect is modest, the indirect effect of monetary policy drives the bulk of the economy’s total output response.
The Bankruptcy Reform Act of 1978 made bankruptcy a more attractive option for most households by increasing the amount of wealth that households could retain after bankruptcy. Other factors that have likely contributed to the upward trend are the decrease in the social stigma of filing for bankruptcy and the growing access to credit in the United States.