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

  • Merxe Tudela
  • Garry Young

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.

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File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2005/WP266.pdf
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Paper provided by Bank of England in its series Bank of England working papers with number 266.

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Date of creation: Jul 2005
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Handle: RePEc:boe:boeewp:266
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  1. Miles, David K, 1997. "Modelling the Impact of Demographic Change Upon the Economy," CEPR Discussion Papers 1762, C.E.P.R. Discussion Papers.
  2. 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.
  3. 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.
  4. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
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