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Household Debt and Household Spending Behavior: Evidence from Malaysia

Author

Listed:
  • Yunchao, Cai

    (Department of Economics International Islamic University Malaysia P.O. Box 10, 50728 Kuala Lumpur MALAYSIA)

  • Abdullah Yusof, Selamah

    (Department of Economics International Islamic University Malaysia P.O. Box 10, 50728 Kuala Lumpur MALAYSIA)

  • Mohd Amin, Ruzita

    (Department of Economics International Islamic University Malaysia P.O. Box 10, 50728 Kuala Lumpur MALAYSIA)

  • Mohd Arshad, Mohd Nahar

    (Department of Economics International Islamic University Malaysia P.O. Box 10, 50728 Kuala Lumpur MALAYSIA)

Abstract

Using data collected from urban households in the Klang Valley, Malaysia, this study examined the impact of household debt on urban household consumption decisions. The findings revealed that household debt does not generally affect consumption decisions, except in the case of expenditure on vacation, which tends to be reduced for households facing high levels of debt. Furthermore, general financial wellness tends to be the main factor affecting consumption rather than debt. Households with poorer financial wellness make more frequent cuts to daily meals, fruit, utility, transportation, clothing, medical care, vacations, and leisure activities. Although the impact of debt on consumption is not extensive, it must be closely monitored to ensure that the risk is contained and that the wellbeing of households is not adversely affected.

Suggested Citation

  • 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.
    • Handle: RePEc:ukm:jlekon:v:54:y:2020:i:1:p:111-120
    DOI: http://dx.doi.org/10.17576/JEM-2020-5401-8
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    References listed on IDEAS

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