Macroeconomic Implications of Rising Household Debt

Debelle, Guy

doi:10.2139/ssrn.786385

Cited by 83 publications

(89 citation statements)

References 45 publications

(38 reference statements)

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“…Iacoviello (2005) states that US household debt, having been relatively stable throughout the 1960s and 1970s, has jumped out of proportion since the 1980s, with real activity rising between 1981 and 2003 from 67 per cent to 113 per cent of disposable personal income. Increases in household debt as compared to disposable income have occurred in most countries where data are available, and even stronger increases than in the US took place in the Netherlands, Denmark and Australia (Debelle 2004). Stutzer (2004) shows that as people get richer, their material aspirations increase.…”

Section: Economic Aspirationsmentioning

confidence: 99%

The Low Fertility Trap Hypothesis. Forces that May Lead to Further Postponement and Fewer Births in Europe

Lutz

Skirbekk²,

Testa³

2008

Populationyearbook

189

135

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This paper starts from the assessment that there is no good theory in the social sciences that would tell us whether fertility in low-fertility countries is likely to recover in the future, stay around its current level or continue to fall. This question is key to the discussion whether or not governments should take action aimed at influencing the fertility rate. To enhance the scholarly discussion in this field, the paper introduces a clearly defined hypothesis which describes plausible self-reinforcing mechanisms that would result, if unchecked, in a continued decrease of the number of births in the countries affected. This hypothesis has three components: a demographic one based on the negative population growth momentum, i.e., the fact that fewer potential mothers in the future will result in fewer births; a sociological one based on the assumption that ideal family size for the younger cohorts is declining as a consequence of the lower actual fertility they see in previous cohorts; and an economic one based on the first part of Easterlin's (1980) relative income hypothesis, namely, that fertility results from the combination of aspirations and expected income, and assuming that aspirations of young adults are on an increasing trajectory while the expected income for the younger cohorts declines, partly as a consequence of population ageing induced by low fertility. All three factors would work towards a downward spiral in births in the future. If there is reason to assume that such mechanisms will indeed be at work, then this should strengthen the motivation of governments to take immediate action (possibly through policies addressing the tempo effect) in order to still escape from the expected trap. *

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Section: Economic Aspirationsmentioning

confidence: 99%

The Low Fertility Trap Hypothesis. Forces that May Lead to Further Postponement and Fewer Births in Europe

Lutz

Skirbekk²,

Testa³

2008

Populationyearbook

189

135

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“…As the household ages and labour income grows, indebtedness decreases and once it is repaid, assets are accumulated. Low real interest rates also contribute to higher level of borrowing rates (Debelle, 2004). On the other hand, the decline in interest rates adversely affects the return on assets, and therefore the ultimate effect of rate-cutting depends largely on which stage of the life cycle most households are in.…”

Section: Theoretical Framework Underpinning Debt Usementioning

confidence: 99%

The threshold effects of household indebtedness on multidimensional poverty

Ntsalaze

Ikhide

2017

IJSE

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DeclarationBy submitting this dissertation electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification.This dissertation includes two published and one accepted but not yet published original papers in peer-reviewed international journals. The fourth paper representing chapter eight is ready for submission for peer review. The development and writing of the papers (published and unpublished) were the principal responsibility of myself and, for each of the cases where this is not the case, a declaration is included in the dissertation indicating the nature and extent of the contributions of co-authors. AbstractGlobal household indebtedness has reached unprecedented levels over the past few decades.The household sector has had to cope with significant losses in income and wealth as well as the burden of debt service since the beginning of the financial crisis. Research focus on this phenomenon, together with its social implications, has grown. This study uses the National Income Dynamics Study (NIDS) data to empirically investigate the effects of household debt on multidimensional poverty. This was achieved through four independent research papers meant to address different angles of the subject. Chapter 5 provides a snapshot of the prevalence of over-indebtedness, using various international indicators and the National Credit Regulator (NCR) indicator, and describes which households are over-indebted. A total of eight percent of South African households are overindebted, and 61.4 percent of those households are found in the lowest income category (R0 -R2 000), spending more than 45 percent of their household income on debt repayments, which is beyond levels that are considered sustainable. The alarming revelation is that, according to the unsecured debt indicator, 15.2 percent of households are over-indebted, while 11 percent of households are driven below the relative income poverty line after making debt repayments. Stellenbosch University https://scholar.sun.ac.za 3The racial distribution indicates that households headed by Africans are overrepresented (79%).Most over-indebted households are found amongst those who own their places of residence (78.6%), do not receive government grants (71.7%), are male (53.8%), and have an unemployed household head (53.5%).Chapter 6 examines the presence of thresholds in the debt-poverty nexus at micro level, i.e. the tipping point above which debt is associated with more multidimensional poverty. By applying the Generalised Additive Model (GAM) using regression splines, the study finds the existence of critical tipping points between household debt service-to-income ratio and multidimensional poverty along with other explanatory variables (age...

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“…This finding is in line with much of the recent work (including Iacoviello and Neri, 2007;Muellbauer, 2007 andCardarelli et al, 2008). In addition, it is well-documented (see e.g., Davey, 2001;Debelle, 2004 andGreenspan andKennedy, 2005) that in Anglo-Saxon countries the amount of money households withdraw from their mortgages (mortgage equity withdrawal) is strongly correlated with housing wealth and housing prices. As argued by Catte et al (2004) this has less so been the case in continental Europe, where mortgage markets are not as developed (in this respect).…”

Section: Ecb Working Paper Series No 1117mentioning

confidence: 99%

What Drives Personal Consumption? The Role of Housing and Financial Wealth

Slacalek¹

2009

The B.E. Journal of Macroeconomics

133

134

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract 4 Non-technical summary 5 Terms of use: Documents in

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Macroeconomic Implications of Rising Household Debt

Cited by 83 publications

References 45 publications

The Low Fertility Trap Hypothesis. Forces that May Lead to Further Postponement and Fewer Births in Europe

The Low Fertility Trap Hypothesis. Forces that May Lead to Further Postponement and Fewer Births in Europe

The threshold effects of household indebtedness on multidimensional poverty

What Drives Personal Consumption? The Role of Housing and Financial Wealth

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