The tremendous household debt in Asia Pacific countries: is it determined by financial development?

Since the early twentieth century, the tremendous increase in household debt has motivated researchers to find the determinant factors of this phenomenon. The paper uses data from Asia Pacific countries and dynamic heterogeneous panel method analysis to determine factors of household debt. The results find that financial development and financial institution access have a long-run positive relationship, stable and convergent with household debt. This implies that as the financial system developed, as evidenced by easy access to financial institutions, it provided some attractive financial instruments and financial markets became liquid. As a result, household debt increased due to easier access to financing and credit options that matched people's needs. However, in the short run, financial development and financial institution access do not strongly affect household debt of countries overall. Also, the real interest rate and housing price have a positive impact, and stock capital accumulation and household consumption harm household debt in the long run. Therefore, supervision of the volatility of household debt and financial development are important for sustainable economic growth.