IDEAS home Printed from https://ideas.repec.org/a/boe/qbullt/0150.html
   My bibliography  Save this article

Household debt and spending

Author

Listed:
  • Bunn, Philip

    (Bank of England)

  • Rostom, May

    (Bank of England)

Abstract

This article is the first study to use microdata to assess the role of debt levels in determining UK households’ spending patterns over the course of the recent recession. There is evidence that high levels of household debt have been associated with deeper downturns and more protracted recoveries in the United Kingdom. Cuts in spending associated with debt are estimated to have reduced the level of aggregate private consumption by around 2% after 2007, unwinding the faster growth in spending by highly indebted households, relative to other households, before the financial crisis.

Suggested Citation

  • Bunn, Philip & Rostom, May, 2014. "Household debt and spending," Bank of England Quarterly Bulletin, Bank of England, vol. 54(3), pages 304-315.
    • Handle: RePEc:boe:qbullt:0150
    as

    Download full text from publisher

    File URL: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/household-debt-and-spending.pdf?la=en&hash=5D35C93F223902E2CCAC78F383CD59604577D522
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.
    2. King, Mervyn, 1994. "Debt deflation: Theory and evidence," European Economic Review, Elsevier, vol. 38(3-4), pages 419-445, April.
    3. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2013. "When Credit Bites Back," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s2), pages 3-28, December.
    4. Atif Mian & Kamalesh Rao & Amir Sufi, 2013. "Household Balance Sheets, Consumption, and the Economic Slump," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1687-1726.
    5. Bunn, Philip & Rostom, May & Domit, Silvia & Worrow, Nicola & Piscitelli, Laura, 2013. "The financial position of British households: evidence from the 2013 NMG Consulting survey," Bank of England Quarterly Bulletin, Bank of England, vol. 53(4), pages 351-360.
    6. James S. Cloyne & Paolo Surico, 2017. "Household Debt and the Dynamic Effects of Income Tax Changes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 45-81.
    7. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money in the modern economy: an introduction," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 4-13.
    8. Gauti B. Eggertsson & Paul Krugman, 2012. "Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1469-1513.
    9. Hackworth, Christopher & Radia, Amar & Roberts, Nyssa, 2013. "Understanding the MPC’s forecast performance since mid-2010," Bank of England Quarterly Bulletin, Bank of England, vol. 53(4), pages 336-350.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bunn, Philip & Rostom, May, 2015. "Household debt and spending in the United Kingdom," Bank of England working papers 554, Bank of England.
    2. Atif Mian & Amir Sufi & Emil Verner, 2017. "Household Debt and Business Cycles Worldwide," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1755-1817.
    3. Philip Du Caju & Guillaume Périlleux & François Rycx & Ilan Tojerow, 2021. "A Bigger House at the Cost of an Empty Fridge? The Effect of Households' Indebtedness on Their Consumption: Micro-Evidence Using Belgian HFCS Data," LIDAM Discussion Papers IRES 2021008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. Philip Caju & Guillaume Périlleux & François Rycx & Ilan Tojerow, 2023. "A bigger house at the cost of an empty stomach? The effect of households’ indebtedness on their consumption: micro-evidence using Belgian HFCS data," Review of Economics of the Household, Springer, vol. 21(1), pages 291-333, March.
    5. Andersen, Henrik Yde, 2021. "Pension taxation, household debt and the real economy," Nationaløkonomisk tidsskrift, Nationaløkonomisk Forening, vol. 2021(1), pages 1-14.
    6. Bridges, Jonathan & Jackson, Christopher & McGregor, Daisy, 2017. "Down in the slumps: the role of credit in five decades of recessions," Bank of England working papers 659, Bank of England.
    7. Kukk, Merike, 2016. "How did household indebtedness hamper consumption during the recession? Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 764-786.
    8. Mian, A. & Sufi, A., 2016. "Who Bears the Cost of Recessions? The Role of House Prices and Household Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 255-296, Elsevier.
    9. Andersen, Henrik Yde, 2018. "Do tax incentives for saving in pension accounts cause debt accumulation? Evidence from Danish register data," European Economic Review, Elsevier, vol. 106(C), pages 35-53.
    10. Andersen, Asger Lau & Duus, Charlotte & Jensen, Thais Lærkholm, 2016. "Household debt and spending during the financial crisis: Evidence from Danish micro data," European Economic Review, Elsevier, vol. 89(C), pages 96-115.
    11. Guerini, Mattia & Moneta, Alessio & Napoletano, Mauro & Roventini, Andrea, 2020. "The Janus-Faced Nature Of Debt: Results From A Data-Driven Cointegrated Svar Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 24(1), pages 24-54, January.
    12. Felipe Benguria & Alan M. Taylor, 2020. "After the Panic: Are Financial Crises Demand or Supply Shocks? Evidence from International Trade," American Economic Review: Insights, American Economic Association, vol. 2(4), pages 509-526, December.
    13. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2016. "Sovereigns Versus Banks: Credit, Crises, And Consequences," Journal of the European Economic Association, European Economic Association, vol. 14(1), pages 45-79, February.
    14. Adrien Auclert, 2019. "Monetary Policy and the Redistribution Channel," American Economic Review, American Economic Association, vol. 109(6), pages 2333-2367, June.
    15. Klein, Mathias & Winkler, Roland, 2019. "Austerity, inequality, and private debt overhang," European Journal of Political Economy, Elsevier, vol. 57(C), pages 89-106.
    16. André Kallåk Anundsen & Ragnar Nymoen, 2015. "Did US Consumers 'Save for a Rainy Day' Before the Great Recession?," CESifo Working Paper Series 5347, CESifo.
    17. Yun Jung Kim & Jing Zhang, 2021. "The Relationship Between Debt and Output," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(1), pages 230-257, March.
    18. Drehmann, Mathias & Juselius, Mikael & Korinek, Anton, 2017. "Accounting for debt service: The painful legacy of credit booms," Bank of Finland Research Discussion Papers 12/2017, Bank of Finland.
    19. repec:zbw:bofrdp:2017_012 is not listed on IDEAS
    20. Engelbert Stockhammer & Erik Bengtsson, 2020. "Financial effects in historic consumption and investment functions," International Review of Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 304-326, May.
    21. James Cloyne & Clodomiro Ferreira & Paolo Surico, 2020. "Monetary Policy when Households have Debt: New Evidence on the Transmission Mechanism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(1), pages 102-129.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:qbullt:0150. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publications Group (email available below). General contact details of provider: https://edirc.repec.org/data/boegvuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.