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Household Debts-and Macroeconomic factors Nexus in the United States: A Cointegration and Vector Error Correction Approach

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  • Ntebogang Dinah Moroke

Abstract

This study applies cointegration and error correction approaches to determine the effect of macroeconomic determinants on household debt in the United States of America. Cointegration analysis provides an effective framework used for estimating and modelling relationships from time series data. Short-run and long-run cointegration models explaining the relationships between the US household debt and related macroeconomic factors are estimated. The data used covers a period of 1990 Q1 to 2013 Q1 and is sourced from the electronic data delivery system of the OECD, USA Federal Housing Finance Agency and the USA Department of the Treasury among others. SAS 9.3 version was used to obtain the results. The sample and variables were meritorious according to KMO and Cronbach’s alpha. Unit root test results provided enough evidence to conclude that the series were stationary after first differencing. Further data analysis was carried out with the first lag chosen by the AIC and SBC. Three cointegrating vectors were identified and were later standardised to correctly provide parameter estimates of the vector error correction model of household debts. The model revealed some short and long-run relationships. Revealed by the model is that 1.5 % of long-run equilibrium was corrected per quarter. The results of the current study are crucial to households and policy makers. Researchers may also refer to these results.

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  • Ntebogang Dinah Moroke, 2014. "Household Debts-and Macroeconomic factors Nexus in the United States: A Cointegration and Vector Error Correction Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 6(6), pages 452-465.
    • Handle: RePEc:rnd:arjebs:v:6:y:2014:i:6:p:452-465
    DOI: 10.22610/jebs.v6i6.507
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    1. Ntebogang Dinah Moroke, 2014. "Profiling Some of the Dire Household Debt Determinants: A Metric Multidimensional Scaling Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 6(11), pages 858-867.

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