IDEAS home Printed from https://ideas.repec.org/a/ids/ijmefi/v16y2023i2p139-156.html
   My bibliography  Save this article

Household debt, inequality, and financial stability nexus

Author

Listed:
  • Margaret Rutendo Magwedere
  • Godfrey Marozva

Abstract

South Africa is ranked among the most unequal societies globally in terms of income disparities. The South African Reserve Bank reckoned that 75% of households' income goes to debt repayment. The link between household debt, income inequality and financial stability is examined at national level using annual time series data from 1990 to 2020. Using the autoregressive distributed lags (ARDL) and the Error Correction Model to isolate the long- run and short-run links, the results show that there is long-run relationship between household debt, income inequality and financial stability. Furthermore the results suggest a strong causality as shown by a negative and significant error correction term. In economies where households' income fall below their reference group, in keeping up with the Joneses they tend to borrow increasing the level of indebtedness. The study found evidence that inequality increases indebtedness in the long-run. The findings of the study are essential on the relevance of the interactions between private debt and inequality to macroeconomic stability.

Suggested Citation

  • Margaret Rutendo Magwedere & Godfrey Marozva, 2023. "Household debt, inequality, and financial stability nexus," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 16(2), pages 139-156.
    • Handle: RePEc:ids:ijmefi:v:16:y:2023:i:2:p:139-156
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=130889
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijmefi:v:16:y:2023:i:2:p:139-156. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=218 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.