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The long‐term impact of household debts on household consumption

Author

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  • Zhuyun Xie
  • Yuzhe Xie
  • Yue Liu
  • Guoliang Xu
  • Biao Xu

Abstract

Using panel data from 2012 to 2018, this article investigates the long‐term impact of household debt on household consumption, which is very important to the sustainable development of economy. The result shows that total household debt has a significant crowding‐out impact on long‐term household consumption, whereas nonhousing debt has no significant effect on it. In addition, we also find that the debt of high‐asset families has a weaker impact on long‐term household consumption; the debt of rural families, however, has a greater crowding‐out effect, which means that increasing rural families' leverage will have a greater negative impact on household consumption. Finally, household debt's negative effect on long‐term consumption was not found in older families, whereas it is found at significant level in middle‐aged families. The above results have important implications for China's policy to stimulate consumption and promote sustainable economic development.

Suggested Citation

  • Zhuyun Xie & Yuzhe Xie & Yue Liu & Guoliang Xu & Biao Xu, 2024. "The long‐term impact of household debts on household consumption," Asian Economic Journal, East Asian Economic Association, vol. 38(2), pages 202-231, June.
    • Handle: RePEc:bla:asiaec:v:38:y:2024:i:2:p:202-231
    DOI: 10.1111/asej.12331
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    References listed on IDEAS

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