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The role of household debt heterogeneity on consumption: Evidence from Japanese household data

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  • Nakajima, Jouchi

Abstract

This paper estimates the impact of household debt on consumption behavior using data from the Japanese Preference Parameters Study. The survey features responses to forward-looking questions about key risks to income, shedding light on the motives for household savings behavior. The analysis finds that household income elasticity of consumption is significantly higher for highly-indebted Japanese households than for those with little-to-no debt, and furthermore it is only significant for negative income changes. The evidence points to a significant precautionary saving motive by Japanese households, with savers particularly concerned about unlikely future unemployment spells and longevity risks.

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  • Nakajima, Jouchi, 2020. "The role of household debt heterogeneity on consumption: Evidence from Japanese household data," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 186-197.
    • Handle: RePEc:eee:ecanpo:v:65:y:2020:i:c:p:186-197
    DOI: 10.1016/j.eap.2020.01.003
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    Cited by:

    1. Deng, Xin & Yu, Mingzhe, 2021. "Does the marginal child increase household debt? – Evidence from the new fertility policy in China," International Review of Financial Analysis, Elsevier, vol. 77(C).
    2. Zhang, Dongyang & Guo, Rui, 2020. "The consumption response to household leverage in China: The role of investment at household level," International Review of Financial Analysis, Elsevier, vol. 71(C).
    3. Mr. Fei Han & Ms. Emilia M Jurzyk & Wei Guo & Yun He & Ms. Nadia Rendak, 2019. "Assessing Macro-Financial Risks of Household Debt in China," IMF Working Papers 2019/258, International Monetary Fund.
    4. Sarah Chan, 2020. "China’s Rising Household Debt: A New Debt Trap?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 567-578, December.
    5. Maiko Koga & Kohei Matsumura, "undated". "Marginal Propensity to Consume and the Housing Choice," Bank of Japan Working Paper Series 20-E-3, Bank of Japan.
    6. Kassouri, Yacouba & Alola, Andrew Adewale & Savaş, Savaş, 2021. "The dynamics of material consumption in phases of the economic cycle for selected emerging countries," Resources Policy, Elsevier, vol. 70(C).
    7. R. Basselier & G. Minne & G. Langenus, 2019. "Why has Belgian private consumption growth been so moderate in recent years?," Economic Review, National Bank of Belgium, issue i, pages 51-67, June.
    8. Sala, Hector & Trivín, Pedro, 2022. "Family Finances and Debt Overhang: Evolving Consumption Patterns of Spanish Households," IZA Discussion Papers 15222, Institute of Labor Economics (IZA).
    9. Yunchao, Cai & Abdullah Yusof, Selamah & Mohd Amin, Ruzita & Mohd Arshad, Mohd Nahar, 2020. "Household Debt and Household Spending Behavior: Evidence from Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 54(1), pages 111-120.

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    More about this item

    Keywords

    Consumption; Household debt; Precautionary saving motive;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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