Macroeconomic Implications of Rising Household Debt PDF Download
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Author: Guy Debelle
Publisher:
ISBN:
Category : Consumer credit
Languages : en
Pages : 54
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Book Description
Author: Guy Debelle
Publisher:
ISBN:
Category : Consumer credit
Languages : en
Pages : 54
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Book Description
Author: Aldo Barba
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The article analyses the rise in household indebtedness from the point of view of its causes and long-run macroeconomic implications. The analysis is focussed on the US case. Differently from life-cycle interpretations of the phenomenon, and from interpretations in terms of erratic deviations of current income flows from their long-run trend, the rising household debt is viewed as the outcome of persistent changes in income distribution and growing income inequalities. Through household debt, low wages appear to have been brought to coexist with relatively high levels of aggregate demand, thus providing the solution to the contradiction between the necessity of high and rising consumption levels, for the growth of the system's actual output, and a framework of antagonistic conditions of distribution which keeps within limits the real income of the vast majority of society. The question of the long-run sustainability of this substitution of loans for wages is finally discussed.
Author: Adrian Alter
Publisher: International Monetary Fund
ISBN: 1484349865
Category : Business & Economics
Languages : en
Pages : 49
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Book Description
We confirm the negative relationship between household debt and future GDP growth documented in Mian, Sufi, and Verner (2017) for a wider set of countries over the period 1950–2016. Three mutually reinforcing mechanisms help explain this relationship. First, debt overhang impairs household consumption when negative shocks hit. Second, increases in household debt heighten the probability of future banking crises, which significantly disrupts financial intermediation. Third, crash risk may be systematically neglected due to investors’ overoptimistic expectations associated with household debt booms. In addition, several institutional factors such as flexible exchange rates, higher financial development and inclusion are found to mitigate this impact. Finally, the tradeoff between financial inclusion and stability nuances downside risks to growth.
Author: Yun Kyu Kim
Publisher:
ISBN:
Category : Consumer credit
Languages : en
Pages : 356
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Book Description
The replicated empirical results of Palley (1994) and Schmitt (2000) were presented in chapter 4. Palley's regression framework was also extended in this chapter. To account for structural change due to financial liberalization, we have divided the sample at the fourth quarter of 1982. In the autoregressive distributed lag regression analysis for pre-1982, we found no evidence that the household debt variables had any negative effect on output. However, there is some evidence that the household debt variables have negative effects on output for the post-1982 period.
Author: Atif Mian
Publisher: University of Chicago Press
ISBN: 022627750X
Category : Business & Economics
Languages : en
Pages : 238
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Book Description
“A concise and powerful account of how the great recession happened and what should be done to avoid another one . . . well-argued and consistently informative.” —Wall Street Journal The Great American Recession of 2007-2009 resulted in the loss of eight million jobs and the loss of four million homes to foreclosures. Is it a coincidence that the United States witnessed a dramatic rise in household debt in the years before the recession—that the total amount of debt for American households doubled between 2000 and 2007 to $14 trillion? Definitely not. Armed with clear and powerful evidence, Atif Mian and Amir Sufi reveal in House of Debt how the Great Recession and Great Depression, as well as less dramatic periods of economic malaise, were caused by a large run-up in household debt followed by a significantly large drop in household spending. Though the banking crisis captured the public’s attention, Mian and Sufi argue strongly with actual data that current policy is too heavily biased toward protecting banks and creditors. Increasing the flow of credit, they show, is disastrously counterproductive when the fundamental problem is too much debt. As their research shows, excessive household debt leads to foreclosures, causing individuals to spend less and save more. Less spending means less demand for goods, followed by declines in production and huge job losses. How do we end such a cycle? With a direct attack on debt, say Mian and Sufi. We can be rid of painful bubble-and-bust episodes only if the financial system moves away from its reliance on inflexible debt contracts. As an example, they propose new mortgage contracts that are built on the principle of risk-sharing, a concept that would have prevented the housing bubble from emerging in the first place. Thoroughly grounded in compelling economic evidence, House of Debt offers convincing answers to some of the most important questions facing today’s economy: Why do severe recessions happen? Could we have prevented the Great Recession and its consequences? And what actions are needed to prevent such crises going forward?
Author: M. Ayhan Kose
Publisher: World Bank Publications
ISBN: 1464815453
Category : Business & Economics
Languages : en
Pages : 403
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Book Description
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Author: Mr.Fei Han
Publisher: International Monetary Fund
ISBN: 1513516078
Category : Business & Economics
Languages : en
Pages : 25
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Book Description
High household indebtedness could constrain future consumption growth and increase financial stability risks. This paper uses household survey data to analyze both macroeconomic and finanical stability risks from the rapidly rising household debt in China. We find that rising household indebtedness could boost consumption in the short term, while reducing it in the medium-to-long term. By stress testing households’ debt repayment capacity, we find that low-income households are most vulnerable to adverse income shocks which could lead to signficant defaults. Containing these risks would call for a strengthening of systemic risk assessment and macroprudential policies of the household sector. Other policies include improving the credit registry system and establishing a well-functioning personal insolvency framework.
Author: Marco Lombardi
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 0
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Book Description
"Household debt levels relative to GDP have risen rapidly in many countries over the past decade. The authors investigate the macroeconomic impact of such increases by employing a novel estimation technique proposed by Chudik et al (2016), which tackles the problem of endogeneity present in traditional regressions. Using data on 54 economies over 1990-2015, they show that household debt boosts consumption and GDP growth in the short run, mostly within one year. By contrast, a 1 percentage point increase in the household debt-to-GDP ratio tends to lower growth in the long run by 0.1 percentage point. Their results suggest that the negative long-run effects on consumption tend to intensify as the household debt-to-GDP ratio exceeds 60%. For GDP growth, that intensification seems to occur when the ratio exceeds 80%. Finally, they find that the degree of legal protection of creditors is able to account for the cross-country variation in the long-run impact."--Abstract.
Author: Heikki Hiilamo
Publisher: Edward Elgar Publishing
ISBN: 1785369873
Category : Business & Economics
Languages : en
Pages : 253
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Book Description
The trajectories of increasing household debt are studied in the contexts of the US and the UK, Germany, the Netherlands, Finland and Norway. Household Debt and Economic Crises examines remedies to prevent and alleviate the over-indebtedness epidemic, creating a conceptual framework with which to analyse the causes and consequences of debt. Hiilamo argues that social policies are needed to tackle the current borrowing crisis that endangers and prevents the full participation in society of individuals with excessive debts.
Author: Michael Joseph Irwin
Publisher:
ISBN:
Category : Consumer credit
Languages : en
Pages : 0
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Book Description
I study how the trends and cycles of unsecured consumer credit impact the aggregate economy. This is an essential topic because the ratios of both credit card debt and student loan debt to GDP have become quite large. In chapter 1, I study how the interaction between unemployment insurance (UI) and unsecured consumer credit impacts consumption and welfare over the business cycle. I measure the effects of this relationship using a quantitative equilibrium model of labor markets and credit markets calibrated to depict the employment risk, credit and bankruptcy behavior in the US economy. I find that the extension in the duration of UI benefits during the Great Recession prevented over a 29 percentage point further drop in unsecured consumer credit and a 2 percentage point further drop in aggregate consumption. I show that improvements in the terms of credit accounted for over 60% of the gains in aggregate consumption from extensions in the duration of benefits. In chapter 2, I study the implications of allowing student loans to be discharged in bankruptcy. I develop a model of education, student loans, credit card debt and bankruptcy. I explicitly model the institution that student loans cannot be discharged in bankruptcy in the United States. I find that allowing student debt to be discharged in bankruptcy results in more college education, but a significant rise in consumer bankruptcies. However, the policy more than pays for itself in the sense that the increase in tax revenue offsets the losses from more bankruptcy. Moreover, the policy leads to significant welfare gains where low-productivity and moderately wealthy households experience the largest gains. In chapter 3, I develop a new solution method that is faster and more accurate than existing methods in solving problems with non-convexities. This method relies on creating numerous endogenous grids, one for each convex set of the initial assets consistent with optimal decisions. Each each endogenous grid has a proxy solution, and a global solution is chosen as the optimal proxy solution. Because models of consumer credit and default generate non-convexities, this method is particularly useful in solving the models of chapters 1 and 2.
