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The determinants of household debt and balance sheets in the United Kingdom

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  • Merxe Tudela
  • Garry Young

Abstract

Household indebtedness has grown sharply in the United Kingdom in recent years. This paper proposes a framework for understanding this based on a model in which households are assumed to plan their lifetime spending rationally, allowing for bequests to future generations. The model is set up to be consistent with both aggregate and disaggregated balance sheet positions as revealed in the British Household Panel Survey. The paper goes on to outline the effect on debt and balance sheets of changes in interest rates, house prices, preferences and retirement income.

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File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2005/WP266.pdf
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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 266.

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Date of creation: Jul 2005
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Handle: RePEc:boe:boeewp:266

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References

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  1. Miles, David K, 1997. "Modelling the Impact of Demographic Change Upon the Economy," CEPR Discussion Papers 1762, C.E.P.R. Discussion Papers.
  2. Sebastian Barnes & Garry Young, 2003. "The rise in US household debt: assessing its causes and sustainability," Bank of England working papers 206, Bank of England.
  3. Victoria Redwood & Merxe Tudela, 2004. "From tiny samples do mighty populations grow? Using the British Household Panel Survey to analyse the household sector balance sheet," Bank of England working papers 239, Bank of England.
  4. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
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Cited by:
  1. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
  2. Luisa Farinha, 2007. "Indebtedness of Portuguese Households: Recent Evidence Based on the Household Wealth Survey 2006-2007," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  3. Maxime Desmarais-Tremblay & François Vaillancourt, 2011. "Le bilan des particuliers au Canada : évolution et analyse," CIRANO Project Reports 2011rp-17, CIRANO.
  4. Waldron, Matt & Zampolli, Fabrizio, 2010. "Household debt, house prices and consumption in the United Kingdom: a quantitative theoretical analysis," Bank of England working papers 379, Bank of England.
  5. Hintermaier, Thomas & Koeniger, Winfried, 2011. "Debt Portfolios," IZA Discussion Papers 5653, Institute for the Study of Labor (IZA).
  6. Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland – estimations and simulations with micro data," Research Discussion Papers 5/2007, Bank of Finland.
  7. Christopher Kent & Crystal Ossolinski & Luke Willard, 2007. "The Rise of Household Indebtedness," RBA Annual Conference Volume, in: Christopher Kent & Jeremy Lawson (ed.), The Structure and Resilience of the Financial System Reserve Bank of Australia.
  8. Fernando Nieto, 2007. "The determinants of household credit in Spain," Banco de Espa�a Working Papers 0716, Banco de Espa�a.

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