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We evaluate and partially challenge the household leverage view of the Great Recession. In the data, employment and consumption declined more in U.S. states where household debt declined more. We study a model of a monetary union composed of many regions in which liquidity constraints shape the response of employment and consumption to changes in debt. We estimate the model with Bayesian methods combining state and aggregate data. Changes in household credit explain 40% of the differential rise and fall of employment across states, but a small fraction of the aggregate employment decline in 2007–2010. Nevertheless, since household deleveraging was gradual, credit shocks greatly slowed the recovery.

Many countries introduced borrower-based instruments to constrain credit to households exceeding a limit on their loan-to-value ratio, their (mortgage) debt-to-income ratio or their debt service-to-income ratio. We evaluate how well borrower-based instruments can target households that would become vulnerable after a shock. We apply the signals approach to derive “optimal” limits that minimize classification errors (either granting credit to financially vulnerable households or constraining credit to households that are not vulnerable). To illustrate, we simulate an adverse scenario using household-level data from Luxembourg. We find that combining several ratios could better target households that would become vulnerable after a shock.

Recently, the continuous rise in household debt levels has put increasing pressure on China’s households, and the divorce rate has been increasing simultaneously. Therefore, how does household debt influence an individual’s decision to divorce? Using empirical data from the China Family Panel Studies from 2010 to 2018, this study examines the influence of household debt on the decision to divorce from a micro perspective. Our findings reveal the following: (1) the level of household debt significantly impacts the divorce rate, and the estimation results still hold after a series of robustness tests; (2) heterogeneity analysis reveals that non-housing debt, as a component of household debt, is more sensitive to individual divorce behavior, whereas housing debt has no significant effect. Moreover, the analysis of different sample groups shows that household debt positively impacts the divorce rate of middle-income groups, individuals with high levels of substance craving, and those living in eastern China; (3) additional research indicates that household debt affects an individual’s mental status, changes their marital status, and increases the probability of household divorce. This study’s findings have provided new evidence for understanding theories about household debt and marital behavior and references for the government to develop relevant policies.

The aim of this paper is to analyse the evolution of Spanish households’ indebtedness and financial vulnerability over the course of this century using micro-data from the Household Finance and Consumption Survey. Our results show a growing debt participation of Spanish households and an increase in the stock of outstanding debt of indebted households, a trend that reversed with the end of the Great Recession. Moreover, the percentage of financially vulnerable households according to three indicators grew dramatically until the end of the downward phase of the last economic cycle and showed considerable signs of improvement during the second half of 2010s. These results, nonetheless, call attention to the number of Spanish households being unable to service their debts in the face of an economic downturn.

Using variation in minimum wages across cities and controlling for differences in business-cycle factors and long-run local economic trends, we find that following minimum wage increases, both, prices and nominal spending rise modestly. These gains are larger for certain subcategories of goods such as food away from home and in locations where low-wage workers account for a larger share of employment. Further, minimum wage increases are associated with reduced total debt among households with low credit scores, higher auto debt, and increased access to credit.

Debt is beneficiary to individuals and households when their consumption can be extended with credit. However, the benefits gained from availability of credit have negative implications, and research on indebtedness has become a focus of many scholars from different fields of study. Therefore, this research sought to explore the implications of household debt on individuals’ social and economic well-being by using 407 sample data collected from the urban households in Klang Valley, Malaysia. Several regression models were applied to investigate the impact of household debt on individual’s well-being from various aspects such as economic, psychological, physical health and family relationships. The principle finding was that the impact of household debt extended beyond the economic aspect to all the other three dimensions as well. However, the analysis shows that there are differences with regard to the extent of the impact across the four aspects. The highest impact is on the psychological well-being, compared to other dimensions of well-being. Furthermore, the research also found there is a clear difference between the effect of secured loan and unsecured loan on the social and economic well-being.

This paper investigates responses of household debt to COVID-19-related data like confirmed cases and confirmed deaths within a neural networks panel VAR for OECD countries. Our model also includes a plethora of non-pharmaceutical and pharmaceutical interventions. We opt for a global neural networks panel VAR (GVAR) methodology that nests all OECD countries in the sample. Because linear factor models are unable to capture the variability in our data set, the use of an artificial neural network (ANN) method permits to capture this variability. The number of factors, as well as the number of intermediate layers, is determined using the marginal likelihood criterion and we estimate the GVAR with MCMC techniques. We also report δ-values that capture the dominance of each individual country in the network. In terms of dominant countries, the UK, the USA, and Japan dominate interconnections within the network, but also countries like Belgium, Netherlands, and Brazil. Results reveal that household debt positively responds to COVID-19 infections and deaths. Lockdown measures such as stay-at-home advice, and closing schools, all have a positive impact on household debt, though they are of transitory nature. However, vaccinations and testing appear to negatively affect household debt.

This study reviews the rising household debt and nonfinancial corporation debt in Vietnam, a socialist-oriented, lower middle-income emerging economy. Vietnam has made huge strides in economic growth within three decades of reforms, lifting millions of people out of poverty thanks to better access to credit. At the same time, there are lending and borrowing practices that signal troubles ahead. Based on a thorough examination of the theoretical literature on indebtedness, the study sets out to identify the drivers of borrowing and over-borrowing in Vietnam in recent years. Particularly, the abundant financial and physical resources have given rise to consumerism and the boom of the super-rich. These are two of the four factors that have shifted Vietnamese culture from one that traditionally condemned debt as a vice to one that now tolerates indebtedness. The other two factors can be found at the corporate level where there is an over-reliance on debt financing and rampant rent-seeking. Here, a kind of `resource curse' threatens sustainable corporate growth - businesses rely too much on borrowing to fuel their operations, but in fact are overlooking the innovation factor. The new politics of debt, we suggest, have created a toxically pro-consumption, debt-tolerant society.

We analyze, using the micro data of the Household Financial Survey (HFS) of the Bank of Spain, the consumption consequences of the household balance sheets and debt accumulation during the real estate bubble of 2002–2005, the Great Recession (2008–2011) and the subsequent economic recovery phase (2014–2017). Using quantile regression models, we find heterogeneity in household consumption behavior with respect to income and net worth levels, and in response to changes in household net worth in the last two periods. During the considered real estate bubble period, this heterogeneity in behavior is diminished, and only occurs in relation to the level of net wealth, in line with Hyman Minsky’s Paradox of Tranquility. These findings favor the post-Keynesian theory on consumption. The greater inequality leads to a higher propensity of certain households to consume in response to changes in housing and financial net worth. This is compatible with the relative income hypothesis extended in expenditure cascades models. Otherwise, households will be willing to take on more risk during economic boom periods associated with a real estate bubble, which translates into debt-financed consumption that virtually makes such heterogeneity practically disappear.

PurposeIn this paper, the authors investigate whether coronavirus disease 2019 (COVID-19) impacts household finances, like household debt repayments in the UK.Design/methodology/approachThis paper employs a vector autoregressive (VAR) model that nests neural networks and uses Mixed Data Sampling (MIDAS) techniques. The authors use data information related to COVID-19, financial markets and household finances.FindingsThe authors' results show that household debt repayments' response to the first principal component of COVID-19 shocks is negative, albeit of low magnitude. However, when the authors employ specific COVID-19-related data like vaccines and tests the responses are positive, insinuating the underlying dynamic complexities. Overall, confirmed deaths and hospitalisations negatively affect household debt repayments. The authors also report low persistence in household debt repayments. Generalised impulse response functions (IRFs) confirm the main results. As draconian measures, the lockdowns are eased and the COVID-19 shocks are diminishing, and household financial data converge to the levels prior to the pandemic albeit with some lags.Originality/valueTo the best of the authors' knowledge, this is the first study that examines the impact of the pandemic on household debt repayments. The authors' findings show that policy response in the future should prioritise innovation of new vaccines and testing.