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The determinants of household debt and balance sheets in the United Kingdom

Author

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  • Merxe Tudela
  • Garry Young

Abstract

Household indebtedness has grown sharply in the United Kingdom in recent years. This paper proposes a framework for understanding this based on a model in which households are assumed to plan their lifetime spending rationally, allowing for bequests to future generations. The model is set up to be consistent with both aggregate and disaggregated balance sheet positions as revealed in the British Household Panel Survey. The paper goes on to outline the effect on debt and balance sheets of changes in interest rates, house prices, preferences and retirement income.

Suggested Citation

  • Merxe Tudela & Garry Young, 2005. "The determinants of household debt and balance sheets in the United Kingdom," Bank of England working papers 266, Bank of England.
    • Handle: RePEc:boe:boeewp:266
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    File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2005/WP266.pdf
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    References listed on IDEAS

    as
    1. Sebastian Barnes & Garry Young, 2003. "The rise in US household debt: assessing its causes and sustainability," Bank of England working papers 206, Bank of England.
    2. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January.
    3. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 729-758.
    4. Victoria Redwood & Merxe Tudela, 2004. "From tiny samples do mighty populations grow? Using the British Household Panel Survey to analyse the household sector balance sheet," Bank of England working papers 239, Bank of England.
    5. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Meng, Xianming & Hoang, Nam T. & Siriwardana, Mahinda, 2013. "The determinants of Australian household debt: A macro level study," Journal of Asian Economics, Elsevier, vol. 29(C), pages 80-90.
    2. repec:zbw:bofrdp:2007_005 is not listed on IDEAS
    3. Anelisa Nomatye & Andrew Phiri, 2018. "Investigating the Macroeconomic Determinants of Hosehold Debt in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 62-69.
    4. Thomas Hintermaier & Winfried Koeniger, 2016. "Debt Portfolios and Homestead Exemptions," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(4), pages 103-141, October.
    5. Thomas Hintermaier & Winfried Koeniger, 2016. "Debt Portfolios and Homestead Exemptions," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(4), pages 103-141, October.
    6. Luisa Farinha, 2008. "Indebtedness of Portuguese Households: Recent Evidence Based on the Household Wealth Survey 2006-2007," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    7. repec:zbw:bofitp:2011_007 is not listed on IDEAS
    8. Maxime Desmarais-Tremblay & François Vaillancourt, 2011. "Le bilan des particuliers au Canada : évolution et analyse," CIRANO Project Reports 2011rp-17, CIRANO.
    9. Bogdan Andrei Dumitrescu & Adrian Enciu & Cătălina Adriana Hândoreanu & Carmen Obreja & Florin Blaga, 2022. "Macroeconomic Determinants of Household Debt in OECD Countries," Sustainability, MDPI, vol. 14(7), pages 1-14, March.
    10. Whitaker, Stephan D., 2018. "Big Data versus a survey," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 285-296.
    11. Christopher Kent & Crystal Ossolinski & Luke Willard, 2007. "The Rise of Household Indebtedness," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Jeremy Lawson (ed.),The Structure and Resilience of the Financial System, Reserve Bank of Australia.
    12. Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland: estimations and simulations with micro data," Bank of Finland Research Discussion Papers 5/2007, Bank of Finland.
    13. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland, Institute for Economies in Transition.
    14. Ntebogang Dinah Moroke, 2014. "Household Debts-and Macroeconomic factors Nexus in the United States: A Cointegration and Vector Error Correction Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 6(6), pages 452-465.
    15. Winfried Koeniger & Thomas Hintermaier, 2009. "Bankruptcy and Debt Portfolios," 2009 Meeting Papers 348, Society for Economic Dynamics.
    16. Waldron, Matt & Zampolli, Fabrizio, 2010. "Household debt, house prices and consumption in the United Kingdom: a quantitative theoretical analysis," Bank of England working papers 379, Bank of England.
    17. Delgado Fuentealba, Carlos L. & Muñoz Mendoza, Jorge A. & Sepúlveda Yelpo, Sandra M. & Veloso Ramos, Carmen L. & Fuentes-Solís, Rodrigo A., 2021. "Household debt, automatic bill payments and inattention: Theory and evidence," Journal of Economic Psychology, Elsevier, vol. 85(C).
    18. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland Institute for Emerging Economies (BOFIT).
    19. Ersi Athanassiou, 2007. "Prospects for Household Borrowing in Greece and their Importance for Growth," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 5(1), pages 89-101.
    20. Petr Jakubík, 2010. "Household Response to the Economic Crisis Micro-simulation for the Czech Economy," IFC Working Papers 6, Bank for International Settlements.
    21. Merike Kukk, 2014. "Distinguishing the Components of Household Financial Wealth: the Impact of Liabilities on Assets in Euro Area Countries," Proceedings of International Academic Conferences 0100418, International Institute of Social and Economic Sciences.
    22. Fernando Nieto, 2007. "The determinants of household credit in Spain," Working Papers 0716, Banco de España.
    23. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.

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