8  Malmandier and Nagel (2011): “Depression Babies: do macroeconomic experiences affect risk taking?”, Quarterly Journal of Economics. 9  See Bernanke, B (1983), “Irreversibility, uncertainty and cyclical investment”, Quarterly Journal of Economics, 98(1). 10  Bloom (2009) shows how economic uncertainty reduces the shrinkage of low productivity firms and the expansion of high productivity firms, reducing the reallocation of resources towards more productive units. Leduc and Liu (2012), emphasise the aggregate demand effects empirically for the US. Leduc and Liu (2012), “Uncertainty shocks are aggregate demand shocks”, Federal Reserve Bank of San Francisco Staff Paper 2012–10. 11  Together with the aggregate effects, higher stock market volatility generates greater dispersion in firms’ profit growth and industries’ productivity growth. Bloom, N (2009), “The impact of uncertainty shocks”, Econometrica, 77(3), May. 12  Bloom, N, Bond, S and Van Reenen, J (2007), “Uncertainty and investment dynamics”, Review of Economic Studies, 74.
Since the vast majority of household debt is related to housing, it is not surprising that debtto-income ratios were highest and rose most in places that experienced rapid rises in home prices. So, for example, debt-to-income ratios are among the highest in the nation in those places most associated with the housing bubble, such as California, Florida, Nevada and Arizona. This relationship can also be seen within our region. For example, household debt grew more slowly than nationally and has remained relatively low in upstate New York, which was largely bypassed by the housing boom. The key exception is New York City, where a large share of residents rent their homes. Overall, city residents still have relatively low levels of mortgage debt, even though these debt levels rose during the run-up to the recession. Elsewhere in the region, debt levels tended to rise most in places where housing prices increased the most, such as Long Island and parts of New Jersey. During the crisis, in most parts of our region, households reduced their debts. But, because they had not accumulated as much during the run-up, the decline was well below the national average. In general, households in our region – with some exceptions that I will mention in a moment – have not been under as much pressure to deleverage. It’s particularly notable that in upstate New York, where debt levels are well below the national level, households have actually continued to very slowly add to their debt.