The Debt-Payment-to-Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys
AbstractLiquidity constraints have been proposed as an important explanation for deviations from the rational expectations/permanent income hypothesis. This paper introduces to the liquidity constraint literature the ratio of a household's debt payments to its disposable personal income, the debt service ratio (DSR). We find that a household with a high DSR is significantly more likely to be turned down for credit than other households. Also, the consumption growth of likely constrained households, identified using the DSR along with the liquid-asset-to-income ratio, is significantly more sensitive to past income than that of other households, confirming the DSR's value in identifying constrained households. Copyright (c) 2010 The Ohio State University.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 42 (2010)
Issue (Month): 7 (October)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hyytinen, Ari & Putkuri, Hanna, 2012. "Household optimism and borrowing," Research Discussion Papers 21/2012, Bank of Finland.
- Meta Brown & Andrew Haughwout & Donghoon Lee & Wilbert van der Klaauw, 2011. "Do we know what we owe? A comparison of borrower- and lender-reported consumer debt," Staff Reports 523, Federal Reserve Bank of New York.
- Geng Li, 2012. "Gamblers as personal finance activists," Finance and Economics Discussion Series 2012-18, Board of Governors of the Federal Reserve System (U.S.).
- Kathleen W. Johnson & Geng Li, 2011. "Are adjustable-rate mortgage borrowers borrowing constrained?," Finance and Economics Discussion Series 2011-21, Board of Governors of the Federal Reserve System (U.S.).
- Song Han & Benjamin J. Keys & Geng Li, 2011. "Credit supply to personal bankruptcy filers: evidence from credit card mailings," Finance and Economics Discussion Series 2011-29, Board of Governors of the Federal Reserve System (U.S.).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.