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The determinants of Australian household debt: A macro level study

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  • Meng, Xianming
  • Hoang, Nam T.
  • Siriwardana, Mahinda
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    Abstract

    This paper employs a cointegrated Vector Autoregression (CVAR) model to explore the determinants of Australian household debt. The results show that housing prices, GDP and the population in the economy have a positive effect on household borrowing. Meanwhile, interest rates, the unemployment rate, the number of new dwellings and inflation are found to have a negative effect on Australian household debt. Of these, interest rates are the most significant. Based on these results, it is judicious to rein in household debt during economic booms through monitoring and intervening in the assets market and using monetary policy in a timely, comprehensive, and careful manner.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Asian Economics.

    Volume (Year): 29 (2013)
    Issue (Month): C ()
    Pages: 80-90

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    Handle: RePEc:eee:asieco:v:29:y:2013:i:c:p:80-90

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    Web page: http://www.elsevier.com/locate/asieco

    Related research

    Keywords: Australian household debt; Cointegrated VAR modelling; Housing market; Housing prices; Interest rates;

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    References

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    1. Guy Debelle, 2004. "Household debt and the macroeconomy," BIS Quarterly Review, Bank for International Settlements, March.
    2. Bent Nielsen & Soren Johansen and Rocco Mosconi, 2000. "Cointegration analysis in the presence of structural breaks in the deterministic trend," Economics Series Working Papers 2000-W22, University of Oxford, Department of Economics.
    3. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    4. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
    5. Silvia Magri, 2002. "Italian households' debt: determinants of demand and supply," Temi di discussione (Economic working papers) 454, Bank of Italy, Economic Research and International Relations Area.
    6. Yunyong Thaicharoen & Kiatipong Ariyapruchya & Titima Chucherd, 2004. "Rising Thai Household Debt: Assessing Risks and Policy Implications," Working Papers 2004-01, Economic Research Department, Bank of Thailand.
    7. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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