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How much income is used for debt payments? A new database for debt service ratios

Author

Listed:
  • Mathias Drehmann
  • Anamaria Illes
  • Mikael Juselius
  • Marjorie Santos

Abstract

Important information on the interactions between debt and the real economy can be derived from debt service ratios (DSRs), ie the ratio of principal and interest payments to income. The BIS has accordingly released estimated aggregate DSR data for the total private non-financial sector for 32 countries from 1999 onwards. The methodology and key concepts are presented by Mathias Drehmann, Anamaria Illes, Marjorie Santos (BIS) and Mikael Juselius (Bank of Finland). For most countries, DSRs are available for both the household sector and the non-financial corporate sector. This article shows that estimated DSRs can meaningfully portray the movement of debt burdens over time, even though they are extracted from a relatively sparse set of aggregate data. A brief look at the evolution of DSRs in recent years shows that they allow a more comprehensive assessment of credit burdens than the credit-to-income ratio or simple measures of interest payments relative to income, because they take both interest payments and amortisation into account.

Suggested Citation

  • Mathias Drehmann & Anamaria Illes & Mikael Juselius & Marjorie Santos, 2015. "How much income is used for debt payments? A new database for debt service ratios," BIS Quarterly Review, Bank for International Settlements, September.
    • Handle: RePEc:bis:bisqtr:1509h
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    References listed on IDEAS

    as
    1. Christian Dembiermont & Mathias Drehmann & Siriporn Muksakunratana, 2013. "How much does the private sector really borrow - a new database for total credit to the private non-financial sector," BIS Quarterly Review, Bank for International Settlements, March.
    2. Karen E. Dynan & Kathleen W. Johnson & Karen M. Pence, 2003. "Recent changes to a measure of U.S. household debt service," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 89(Oct), pages 417-426, October.
    3. Mathias Drehmann & Mikael Juselius, 2012. "Do debt service costs affect macroeconomic and financial stability?," BIS Quarterly Review, Bank for International Settlements, September.
    4. Umar Faruqui, 2008. "Indebtedness and the Household Financial Health: An Examination of the Canadian Debt Service Ratio Distribution," Staff Working Papers 08-46, Bank of Canada.
    5. Kathleen W. Johnson & Geng Li, 2010. "The Debt-Payment-to-Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1373-1390, October.
    6. Alessi, Lucia & Antunes, Antonio & Babecky, Jan & Baltussen, Simon & Behn, Markus & Bonfim, Diana & Bush, Oliver & Detken, Carsten & Frost, Jon & Guimaraes, Rodrigo & Havranek, Tomas & Joy, Mark & Kau, 2015. "Comparing different early warning systems: Results from a horse race competition among members of the Macro-prudential Research Network," MPRA Paper 62194, University Library of Munich, Germany.
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    More about this item

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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