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Interlinkages Between Household and Corporate Debt in Advanced Economies

Author

Listed:
  • Jean-Charles Bricongne

    (European Commission and Banque de France)

  • Aurora Mordonu

    (European Commission)

Abstract

This article contributes to the debate on deleveraging in the non-financial private sector. It proposes a framework for assessing the interconnectedness of debt dynamics, in particular deleveraging in the household and in the non-financial corporate sectors, using instrumental techniques for a panel of 36 mostly OECD countries, from 1981 to 2015. Households’ debt developments are positively associated with non-financial corporations’ debt dynamics for the whole sample. Conversely, corporate debt has a positive influence on household debt and in particular during deleveraging episodes and in relatively labour-intensive countries. This is consistent with the functioning of the income channel, in which corporations squeeze their wage bill in order to restore profitability.

Suggested Citation

  • Jean-Charles Bricongne & Aurora Mordonu, 2017. "Interlinkages Between Household and Corporate Debt in Advanced Economies," Open Economies Review, Springer, vol. 28(5), pages 1029-1055, November.
    • Handle: RePEc:kap:openec:v:28:y:2017:i:5:d:10.1007_s11079-017-9464-x
    DOI: 10.1007/s11079-017-9464-x
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    Cited by:

    1. Romanos Priftis & Anastasia Theofilakou, 2021. "Growth effects of corporate balance sheet adjustments in the EU," Empirical Economics, Springer, vol. 60(2), pages 773-801, February.
    2. Georgios Magkonis & Anastasia Theofilakou, 2019. "Transmission of sectoral debt shocks in OECD countries: Evidence from the income channel," Working Papers in Economics & Finance 2019-02, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    3. Willem Vanlaer & Mattia Picarelli & Wim Marneffe, 2021. "Debt and Private Investment: Does the EU Suffer from a Debt Overhang?," Open Economies Review, Springer, vol. 32(4), pages 789-820, September.

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    More about this item

    Keywords

    Deleveraging; Households; Non-financial corporations; Debt;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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