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Avrupa Birliği’nde Hanehalkı Borcunun Ekonomik Büyüme Üzerindeki Etkisi: Hanehalkı Borcu Ne Zaman “Çok Fazla”? (The Effect of Household Debt on Economic Growth in European Union: When is Household Debt “Too Much”?)

Author

Listed:
  • Kurul, Zuhal

    (Hacettepe University)

Abstract

This paper attempts to answer two questions by considering household debt developments in European Union over two decades. First, does the rise of household debt in European Union weaken economic growth? Second, if higher household debt weakens economic growth, when does it happen? In this study, we employ a dynamic panel threshold analysis by using data from 27 European Union countries over the period of 2005-2018. The findings reveal that the relationship between household debt and economic growth is nonlinear and the impact of household debt on economic growth is positive until the ratio of household debt in GDP reaches the level of 62%. However, the impact of household debt becomes negative once that threshold is exceeded. This study also examines the impact of household debt on consumption and the evidence shows that the higher levels of household debt crowd out consumption. The overall results of this study underline the critical role of household debt on economic growth and the risks of high indebtedness.

Suggested Citation

  • Kurul, Zuhal, 2021. "Avrupa Birliği’nde Hanehalkı Borcunun Ekonomik Büyüme Üzerindeki Etkisi: Hanehalkı Borcu Ne Zaman “Çok Fazla”? (The Effect of Household Debt on Economic Growth in European Union: When is Household Deb," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 12(2), pages 269-285, April.
    • Handle: RePEc:ris:buecrj:0542
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    More about this item

    Keywords

    European Union; Household Debt; Economic Growth; Consumption Growth; Dynamic Panel Threshold Model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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