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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

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    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, Oxford University Press, 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.
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    Citations

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    Cited by:

    1. Thomas Hintermaier & Winfried Koeniger, 2016. "Debt Portfolios and Homestead Exemptions," American Economic Journal: Macroeconomics, American Economic Association, pages 103-141.
    2. Goderis, B.V.G. & Marsh, I. & Vall Castello, J. & Wagner, W.B., 2006. "Bank Behavior with Access to Credit Risk Transfer Markets," Discussion Paper 2006-100, Tilburg University, Center for Economic Research.
    3. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland, Institute for Economies in Transition.
    4. Nomatye, Anelisa & Phiri, Andrew, 2017. "Investigating the macroeconomic determinants of household debt in South Africa," MPRA Paper 83303, University Library of Munich, Germany.
    5. Whitaker, Stephan, 2015. "Big Data versus a Survey," Working Paper 1440, Federal Reserve Bank of Cleveland.
    6. 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, pages 89-101.
    7. Eva Ortega & Eva Ferraz & Samuel Hurtado, 2007. "Actualización del modelo trimestral del Banco de España," Boletín Económico, Banco de España;Boletín Económico Homepage.
    8. 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.
    9. Meng, Xianming & Hoang, Nam T. & Siriwardana, Mahinda, 2013. "The determinants of Australian household debt: A macro level study," Journal of Asian Economics, Elsevier, pages 80-90.
    10. Luisa Farinha, 2007. "Indebtedness of Portuguese Households: Recent Evidence Based on the Household Wealth Survey 2006-2007," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    11. Maxime Desmarais-Tremblay & François Vaillancourt, 2011. "Le bilan des particuliers au Canada : évolution et analyse," CIRANO Project Reports 2011rp-17, CIRANO.
    12. Christopher Kent & Crystal Ossolinski & Luke Willard, 2007. "The Rise of Household Indebtedness," RBA Annual Conference Volume,in: Christopher Kent & Jeremy Lawson (ed.), The Structure and Resilience of the Financial System Reserve Bank of Australia.
    13. Winfried Koeniger & Thomas Hintermaier, 2009. "Bankruptcy and Debt Portfolios," 2009 Meeting Papers 348, Society for Economic Dynamics.
    14. 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.
    15. Merike Kukk, 2014. "Distinguishing the components of household financial wealth: the impact of liabilities on assets in Euro Area countries," Bank of Estonia Working Papers wp2014-2, Bank of Estonia, revised 10 Oct 2014.
    16. 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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