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Household debt: recent developments and challenges

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  • Anna Zabai

Abstract

The responsiveness of aggregate expenditure to shocks depends on the level and interest rate sensitivity (duration) of household debt, as well as on the liquidity of the assets it finances. Household-level spending adjustments are more likely to be amplified if debt is concentrated among households with limited access to credit or with less scope for self-insurance. The way in which household indebtedness affects the sensitivity of aggregate expenditure matters for both macroeconomic and financial stability. Financial institutions can suffer balance sheet distress from both direct and indirect exposure to the household sector. From a macroeconomic stability viewpoint, monetary transmission is the key issue. In a high-debt economy, interest rate hikes could be more contractionary than cuts are expansionary. These considerations point to a complementarity between current macroprudential and future monetary policy.

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  • Anna Zabai, 2017. "Household debt: recent developments and challenges," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:1712f
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    Cited by:

    1. Aleksandra Riedl, 2019. "Household debt in CESEE economies: a joint look at macro- and micro-level data," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/19, pages 6-28.
    2. Nikolay Hristov & Markus Roth, 2019. "Uncertainty Shocks and Financial Crisis Indicators," CESifo Working Paper Series 7839, CESifo.
    3. Hristov, Nikolay & Roth, Markus, 2022. "Uncertainty shocks and systemic-risk indicators," Journal of International Money and Finance, Elsevier, vol. 122(C).
    4. Michael Funke & Rongrong Sun & Linxu Zhu, 2022. "The credit risk of Chinese households: A micro‐level assessment," Pacific Economic Review, Wiley Blackwell, vol. 27(3), pages 254-276, August.
    5. Kyriaki G. Louka & Nektarios A. Michail, 2022. "Missed Payments, Renegotiations, and Household Consumption," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 20(1), pages 31-50.
    6. Jonathan Kearns & Mike Major & David Norman, 2021. "How Risky Is Australian Household Debt?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(3), pages 313-330, September.
    7. Youngna Choi, 2022. "Economic Stimulus and Financial Instability: Recent Case of the U.S. Household," JRFM, MDPI, vol. 15(6), pages 1-25, June.
    8. Michelle Koketso Kereeditse & Mubanga Mpundu, 2021. "Analysis of Household Debt in South Africa Pre- and Post-Low-Quality Asset Financial Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 11(5), pages 114-121.
    9. Levina, Iren & Sturrock, Robert & Varadi, Alexandra & Wallis, Gavin, 2019. "Modelling the distribution of mortgage debt," Bank of England working papers 808, Bank of England.
    10. Emma Leong, 2022. "Regulating Borrower Hardship in Australia, Singapore, and Hong Kong: Payment Holidays During COVID-19 and Beyond," Journal of Consumer Policy, Springer, vol. 45(3), pages 411-433, September.
    11. Syed Kumail Abbas Rizvi & Nawazish Mirza & Bushra Naqvi & Birjees Rahat, 0. "Covid-19 and asset management in EU: a preliminary assessment of performance and investment styles," Journal of Asset Management, Palgrave Macmillan, vol. 0, pages 1-11.
    12. Nassios, Jason & Giesecke, James A. & Dixon, Peter B. & Rimmer, Maureen T., 2019. "Mandated superannuation contributions and the structure of the financial sector in Australia," Journal of Policy Modeling, Elsevier, vol. 41(5), pages 859-881.
    13. Grzegorz Wałęga & Agnieszka Wałęga, 2021. "Over-indebted Households in Poland: Classification Tree Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 153(2), pages 561-584, January.
    14. Jan Klacso, 2024. "Estimating Macro DSTI for Selected EU Countries," Working and Discussion Papers WP 3/2024, Research Department, National Bank of Slovakia.
    15. Syed Kumail Abbas Rizvi & Nawazish Mirza & Bushra Naqvi & Birjees Rahat, 2020. "Covid-19 and asset management in EU: a preliminary assessment of performance and investment styles," Journal of Asset Management, Palgrave Macmillan, vol. 21(4), pages 281-291, July.
    16. Michael Funke & Rongrong Sun & Linxu Zhu, 2022. "The credit risk of Chinese households: A micro‐level assessment," Pacific Economic Review, Wiley Blackwell, vol. 27(3), pages 254-276, August.
    17. Kwon, Yujin & Park, Sung Y., 2023. "Modeling an early warning system for household debt risk in Korea: A simple deep learning approach," Journal of Asian Economics, Elsevier, vol. 84(C).
    18. Foguesatto, Cristian Rogério & Righi, Marcelo Brutti & Müller, Fernanda Maria, 2024. "Is there a dark side to financial inclusion? Understanding the relationship between financial inclusion and market risk," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    19. Samaratunge, Ramanie & Kumara, Ajantha Sisira & Abeysekera, Lakmal, 2020. "Breaking the Perverse Health-debt Cycle in Sri Lanka: Policy Options," Journal of Policy Modeling, Elsevier, vol. 42(3), pages 728-745.
    20. Mr. Adrian Alter & Elizabeth M. Mahoney, 2020. "Household Debt and House Prices-at-risk: A Tale of Two Countries," IMF Working Papers 2020/042, International Monetary Fund.
    21. repec:zbw:bofitp:2018_012 is not listed on IDEAS
    22. Massimo Coletta & Riccardo De Bonis & Stefano Piermattei, 2019. "Household Debt in OECD Countries: The Role of Supply-Side and Demand-Side Factors," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(3), pages 1185-1217, June.
    23. Engelbert Stockhammer & Karsten Kohler, 2019. "Financialization and demand regimes in advanced economies," Working Papers PKWP1911, Post Keynesian Economics Society (PKES).

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • G01 - Financial Economics - - General - - - Financial Crises

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