A growing body of evidence indicates that liquidity constraints could affect a substantial proportion of U. S. consumers, but little is known about why these constraints might exist. An important, but little-explored, issue is the relationship between inter vivos intergenerational transfers and liquidity constraints. These transfers can ease borrowing constraints. Empirical transfer patterns match those predicted from a model in which transfers are allocated to liquidity-constrained consumers. In particular, the distinction between current and permanent incomes of potential recipients is a key aspect of private-transfer behavior. The findings have important implications for our understanding of consumer behavior.

This paper investigates the connection between credit rationing and private intergenerational transfers. The research is motivated by the idea that private transfers may be a source of funds for consumers who have difficulty borrowing from financial intermediaries. This idea has important implications for consumer behavior, and economists have begun to think about it, but they have given it little empirical attention. Using the 1983 Survey of Consumer Finances, we find that private transfers do tend to be targeted toward consumers who face credit rationing. But we also find that a substantial fraction of U.S. consumers are liquidity-constrained even if one allows for the possibility of private transfers.

We investigate the market's reaction to original-issue deep discount (OID) bonds, which are issued at prices well below par and with coupons set below the market rate. Until July 1982 OID debt offered large tax advantages. Before that date stock-price responses to announcements of OID debt are significantly positive, in contrast to the negative, albeit insignificant, responses associated with par debt announcements. No stock-price gains are observed for OID debt issued after the tax advantages are removed. We conclude that in 1981–82 opportunities provided by financial innovation offset the negative information effects typically associated with debt-financing announcements.

ABSTRACT Our study uses a multinomial logit model to analyze the concurrent termination experience of adjustable‐rate and fixed‐rate mortgages. A new set of ARM‐specific interactive determinants expands the conventional FRM specification to isolate the unique termination behavior of ARMs. We find that expected rate adjustments and large lifetime caps are positively related to ARM termination probabilities while long adjustment frequencies are inversely related. Caps, both periodic and lifetime, have a secondary, inverse effect on termination probabilities when interest‐rate movements exceed cap limits. The model also shows that interest‐rate expectations affect FRM terminations more strongly than ARM terminations.

The authors' study uses a multinomial logit model to analyze the concurrent termination experience of adjustable-rate and fixed-rate mortgages. A new set of adjustable-rate-mortgage-specific interactive determinants expands the conventional fixed-rate-mortgage specification to isolate the unique termination behavior of adjustable-rate mortgages. The authors find that expected rate adjustments and large lifetime caps are positively related to adjustable-rate-mortgage termination probabilities, while long adjustment frequencies are inversely related. Caps, both periodic and lifetime, have a secondary, inverse effect on termination probabilities when interest-rate movements exceed cap limits. The model also shows that interest-rate expectations affect fixed-rate-mortgage terminations more strongly than adjustable-rate-mortgage terminations.

We investigate the effects of leveraged buyouts on total factor productivity (TFP) and related variables using a longitudinal database including over 12,000 manufacturing plants. LBOs (particularly MBOs) that occured during 1983–1986 had a strong positive effect on TFP in the first three post-buyout years: plant productivity increased from 2.0% above industry mean in the three pre-buyout years to 8.3% above industry mean in the three post-buyout years. However, 1981 and 1982 buyouts had no significant productivity effect. The employment and compensation of white-collar workers decline following buyouts, but those of blue-collar workers are unchanged.