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Perspectives on recent trends in consumer debt

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  • Andrew Kish
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    Abstract

    The causes and ramifications of the rise in the consumer debt burden over time have been subject to much debate. This paper first offers a brief overview and analysis of the key economic variables used to evaluate consumer debt levels. The principal focus of the paper, however, is a broad review of the literature on the topic of consumer debt to provide a framework for how to assess recent credit trends. In addition, three explanations for credit growth — the democratization of credit, increased convenience use of credit, and increased homeownership — are evaluated in terms of their contribution to overall credit growth. This paper concludes that while these three trends have all played some part in increasing credit outstanding, there are clearly other significant factors contributing to the increase in consumer debt over time.

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    File URL: http://www.phil.frb.org/pcc/papers/2006/D2006JuneConsumerDebtCover.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Philadelphia in its series Payment Cards Center Discussion Paper with number 06-05.

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    Date of creation: 2006
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    Publication status: Published in Consumer Interests Annual (2006)
    Handle: RePEc:fip:fedpdp:06-05

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    Keywords: Consumer credit;

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    1. Ellis Tallman, 2001. "The burden of debt," EconSouth, Federal Reserve Bank of Atlanta, issue Q2, pages 1.
    2. David B. Gross & Nicholas S. Souleles, 2001. "Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data," NBER Working Papers 8314, National Bureau of Economic Research, Inc.
    3. David B. Gross & Nicholas S. Souleles, 1999. "An Empirical Analysis of Personal Bankruptcy and Delinquency," Center for Financial Institutions Working Papers 98-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
    4. Donald Cox & Tullio Japelli, 1993. "The Effect Of Borrowing Constraints On Consumer Liabilities," Boston College Working Papers in Economics 228, Boston College Department of Economics.
    5. Jonathan McCarthy & Richard W. Peach, 2004. "Are home prices the next "bubble"?," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-17.
    6. Kathleen W. Johnson, 2004. "Convenience or necessity? understanding the recent rise in credit card debt," Finance and Economics Discussion Series 2004-47, Board of Governors of the Federal Reserve System (U.S.).
    7. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-occupied housing as a hedge against rent risk," Working Papers 05-10, Federal Reserve Bank of Philadelphia.
    8. Leonard Nakamura & Tom Stark, 2005. "Benchmark revisions and the U.S. personal saving rate," Working Papers 05-6, Federal Reserve Bank of Philadelphia.
    9. John V. Duca, 2004. "How vulnerable are housing prices?," Southwest Economy, Federal Reserve Bank of Dallas, issue Mar, pages 1, 11-16.
    10. Margaret M. McConnell & Richard W. Peach & Alex Al-Haschimi, 2003. "After the refinancing boom: will consumers scale back their spending?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Dec).
    11. Dean M. Maki, 2000. "The growth of consumer credit and the household debt service burden," Finance and Economics Discussion Series 2000-12, Board of Governors of the Federal Reserve System (U.S.).
    12. Kartik Athreya, 2004. "Shame as it ever was : stigma and personal bankruptcy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 1-19.
    13. Elizabeth Schmitt, 2000. "Does rising consumer debt signal future recessions?: Testing the causal relationship between consumer debt and the economy," Atlantic Economic Journal, International Atlantic Economic Society, vol. 28(3), pages 333-345, September.
    14. Robert G. Murphy, 1997. "Household Debt and Aggregate Consumption Expenditures," Boston College Working Papers in Economics 386, Boston College Department of Economics.
    15. Wenli Li, 2005. "Moving up: trends in homeownership and mortgage indebtedness," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 26-34.
    16. 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.
    17. Mark Furletti, 2003. "Credit card pricing developments and their disclosure," Payment Cards Center Discussion Paper 03-02, Federal Reserve Bank of Philadelphia.
    18. Karen Dynan & Kathleen Johnson & Karen Pence, 2003. "Recent changes to a measure of U.S. household debt service," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 417-426.
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