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The determinants of Australian household debt: A macro level study

  • Meng, Xianming
  • Hoang, Nam T.
  • Siriwardana, Mahinda

This paper employs a cointegrated Vector Autoregression (CVAR) model to explore the determinants of Australian household debt. The results show that housing prices, GDP and the population in the economy have a positive effect on household borrowing. Meanwhile, interest rates, the unemployment rate, the number of new dwellings and inflation are found to have a negative effect on Australian household debt. Of these, interest rates are the most significant. Based on these results, it is judicious to rein in household debt during economic booms through monitoring and intervening in the assets market and using monetary policy in a timely, comprehensive, and careful manner.

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Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 29 (2013)
Issue (Month): C ()
Pages: 80-90

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Handle: RePEc:eee:asieco:v:29:y:2013:i:c:p:80-90
Contact details of provider: Web page: http://www.elsevier.com/locate/asieco

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  1. Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000. "Cointegration analysis in the presence of structural breaks in the deterministic trend," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 216-249.
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  5. Nuno Martins & Ernesto Villanueva, 2005. "The impact of interest-rate subsidies on long-term household debt: evidence from a large program," DNB Working Papers 026, Netherlands Central Bank, Research Department.
  6. Merxe Tudela & Garry Young, 2005. "The determinants of household debt and balance sheets in the United Kingdom," Bank of England working papers 266, Bank of England.
  7. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
  8. Yunyong Thaicharoen & Kiatipong Ariyapruchya & Titima Chucherd, 2004. "Rising Thai Household Debt: Assessing Risks and Policy Implications," Working Papers 2004-01, Economic Research Department, Bank of Thailand.
  9. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  10. 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.
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  12. Guy Debelle, 2004. "Household debt and the macroeconomy," BIS Quarterly Review, Bank for International Settlements, March.
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