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Do households with debt problems spend less?

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  • Lydon, Reamonn

    (Central Bank of Ireland)

Abstract

At the end of 2012, almost one-fifth of owner-occupier mortgages were in arrears. A further five per cent not in arrears were classi ed as "restructured" loans. This Economic Letter looks at the impact of financial distress on household expenditure patterns by comparing the behaviour of households in mortgage distress with similar households in the general population. It nds that, controlling for a wide range of observable household characteristics, including income levels and household composition, households with debt problems spend 18 per cent less on average. We conclude that the mortgage arrears problem exerts a significant drag on aggregate consumption in the economy.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Economic Letters with number 02/EL/13.

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Date of creation: May 2013
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Handle: RePEc:cbi:ecolet:02/el/13

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  1. Reamonn Lyndon & Yvonne McCarthy, 2013. "What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 44(1), pages 117–150.
  2. repec:cbi:ecolet:06/el/11 is not listed on IDEAS
  3. Kathleen W. Johnson & Geng Li, 2007. "Do high debt payments hinder household consumption smoothing?," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2007-52, Board of Governors of the Federal Reserve System (U.S.).
  4. repec:cbi:wpaper:13/rt/11 is not listed on IDEAS
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