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Recent changes to a measure of U.S. household debt service

Author

Listed:
  • Karen E. Dynan
  • Kathleen W. Johnson
  • Karen M. Pence

Abstract

Changes in levels of aggregate household debt in the United States may contain information about the current state of the nation's economy and may affect its future direction. A commonly used measure of household indebtedness is the household debt service ratio (formerly known as the household debt service burden), published since 1980 by the Board of Governors of the Federal Reserve System. Recent changes in financial markets have prompted a comprehensive revision of this statistic. This article describes the revision and introduces a new measure, the financial obligations ratio, which adds recurring obligations -- rent, auto leases, homeowners' insurance, and property taxes -- to the traditional calculation of the debt service ratio. In total, these revisions change the level of the debt service ratio but do not substantively alter its trajectory over time. The article also presents separate estimates of the financial obligations ratio for homeowners and renters. The ratio for homeowners, which may summarize the effects of the recent refinancing boom on the financial obligations of homeowners, has risen gradually over the past decade; the ratio for renters has risen more steeply. The flat contour of the homeowner ratio in recent quarters suggests that homeowners may have rebalanced their portfolios toward lower-cost mortgage debt during the recent period of economic weakness.

Suggested Citation

  • Karen E. Dynan & Kathleen W. Johnson & Karen M. 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.
  • Handle: RePEc:fip:fedgrb:y:2003:i:oct:p:417-426:n:v.89no.10
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    Cited by:

    1. Mikael Juselius & Claudio Borio & Piti Disyatat & Mathias Drehmann, 2017. "Monetary Policy, the Financial Cycle, and Ultra-Low Interest Rates," International Journal of Central Banking, International Journal of Central Banking, vol. 13(3), pages 55-89, September.
    2. Jooyung Lee, 2015. "Development of statistics for aggregate household debt service ratio in Korea," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Assessing household financial positions in Asia, volume 40 Bank for International Settlements.
    3. Igor Livshits & James MacGee & Michèle Tertilt, 2010. "Accounting for the Rise in Consumer Bankruptcies," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 165-193, April.
    4. Mathias Drehmann & Mikael Juselius & Anton Korinek, 2018. "Going With the Flows: New Borrowing, Debt Service and the Transmission of Credit Booms," NBER Working Papers 24549, National Bureau of Economic Research, Inc.
    5. Gajendran Raveendranathan, 2018. "Improved Matching, Directed Search, and Bargaining in the Credit Card Market," Department of Economics Working Papers 2018-05, McMaster University.
    6. repec:spt:apfiba:v:8:y:2018:i:3:f:8_3_4 is not listed on IDEAS
    7. repec:gam:jecnmx:v:5:y:2017:i:2:p:27-:d:102204 is not listed on IDEAS
    8. Andrew Kish, 2006. "Perspectives on recent trends in consumer debt," Payment Cards Center Discussion Paper 06-05, Federal Reserve Bank of Philadelphia.
    9. Mikael Juselius & Mathias Drehmann, 2015. "Leverage dynamics and the real burden of debt," BIS Working Papers 501, Bank for International Settlements.
    10. Karen E Dynan & Donald L Kohn, 2007. "The Rise in US Household Indebtedness: Causes and Consequences," RBA Annual Conference Volume,in: Christopher Kent & Jeremy Lawson (ed.), The Structure and Resilience of the Financial System Reserve Bank of Australia.
    11. Mathias Drehmann & Anamaria Illes & Mikael Juselius & Marjorie Santos, 2015. "How much income is used for debt payments? A new database for debt service ratios," BIS Quarterly Review, Bank for International Settlements, September.
    12. Okechukwu Anyamele, 2015. "Racial/Ethnic Differences in Household Loan Delinquency Rate," The Review of Black Political Economy, Springer;National Economic Association, vol. 42(4), pages 415-442, December.
    13. Juselius, Mikael & Drehmann, Mathias, 2016. "Leverage dynamics and the burden of debt," Research Discussion Papers 3/2016, Bank of Finland.
    14. Lucia Dunn & Tufan Ekici & Paul J. Lavrakas & Jeffery A. Stec, 2004. "An Index to Track Credit Card Debt and Predict Consumption," Working Papers 04-04, Ohio State University, Department of Economics.
    15. Tufan Ekici & Lucia Dunn, 2010. "Credit card debt and consumption: evidence from household-level data," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 455-462.
    16. Mikael Juselius & Anton Korinek & Mathias Drehmann, 2017. "Debt Service: The Painful Legacy of Credit Booms," 2017 Meeting Papers 1258, Society for Economic Dynamics.
    17. Drehmann, Mathias & Juselius, Mikael & Korinek, Anton, 2017. "Accounting for debt service : The painful legacy of credit booms," Research Discussion Papers 12/2017, Bank of Finland.
    18. Karen E. Dynan & Donald L. Kohn, 2007. "The rise in U.S. household indebtedness: causes and consequences," Finance and Economics Discussion Series 2007-37, Board of Governors of the Federal Reserve System (U.S.).

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    Keywords

    Households ; Debt;

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