Do households with debt problems spend less?
AbstractAt 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 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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- 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.
- 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.
- 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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