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Co-Movement Of Steady-State Government Debt And Household Debt

Author

Listed:
  • INSOOK LEE

    (Beijing Normal University, 18 Jinfeng Road, Tangjiawan, Xiangzhou District, Zhuhai, Guangdong 519087, P. R. China)

Abstract

To understand whether and how movements of government debt and household debt are related, stationary equilibrium government debt and household debt are characterized in a politico-economic model where office-seeking policymakers decide government debt and individual voters can borrow facing uninsurable idiosyncratic income shocks. An increase in uninsurable income risk unconditionally raises stationary equilibrium government debt and aggregate household debt together, while an increase in household-loan collateral value or population aging conditionally does so, entailing positive correlations between these two debts’ movements. In contrast, an increase in interest rate conditionally causes these two debts to move in the opposite directions.

Suggested Citation

  • Insook Lee, 2024. "Co-Movement Of Steady-State Government Debt And Household Debt," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(07), pages 2295-2329, December.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:07:n:s0217590821500648
    DOI: 10.1142/S0217590821500648
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    More about this item

    Keywords

    Government debt; household debt; co-movement; uninsurable income risk;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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