Do households with debt problems spend less?
AbstractAt the end of 2012, almost one- fth of owner-occupier mortgages were in arrears. A further ve per cent not in arrears were classi ed as "restructured" loans. This Economic Letter looks at the impact of nancial 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 signi cant drag on aggregate consumption in the economy.
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Bibliographic InfoPaper provided by Central Bank of Ireland in its series Economic Letters with number 02/EL/13.
Date of creation: May 2013
Date of revision:
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- Lydon, Reamonn & McCarthy, Yvonne, 2011.
"What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears,"
Research Technical Papers
14/RT/11, Central Bank of Ireland.
- Reamonn Lyndon & Yvonne McCarthy, 2013. "What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears," The Economic and Social Review, Economic and Social Studies, vol. 44(1), pages 117â150.
- Kelly, Robert, 2011. "The Good, The Bad and The Impaired - A Credit Risk Model of the Irish Mortgage Market," Research Technical Papers 13/RT/11, Central Bank of Ireland.
- Kathleen W. Johnson & Geng Li, 2007. "Do high debt payments hinder household consumption smoothing?," Finance and Economics Discussion Series 2007-52, Board of Governors of the Federal Reserve System (U.S.).
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