Do households with debt problems spend less?
At the end of 2012, almost one-fifth of owner-occupier mortgages were in arrears. A further five per cent not in arrears were classified as "restructured" loans. This Economic Letter looks at the impact of financial distress on household expenditure patterns by comparing the behaviour of households in mortgage distress with similar households in the general population. It finds that, controlling for a wide range of observable household characteristics, including income levels and household composition, households with debt problems spend 18 per cent less on average. We conclude that the mortgage arrears problem exerts a significant drag on aggregate consumption in the economy.
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- Kelly, Robert & O’Malley, Terence, 2016.
"The good, the bad and the impaired: A credit risk model of the Irish mortgage market,"
Journal of Financial Stability,
Elsevier, vol. 22(C), pages 1-9.
- Kelly, Robert, 2011. "The Good, The Bad and The Impaired - A Credit Risk Model of the Irish Mortgage Market," Research Technical Papers 13/RT/11, Central Bank of Ireland.
- McGuinness, Anne, 2011. "The Distribution of Property Level Mortgage Arrears," Economic Letters 06/EL/11, Central Bank of Ireland.
- Kennedy, Gerard & McIndoe-Calder, Tara, 2012. "The Irish Mortgage Market: Stylised Facts, Negative Equity and Arrears," Quarterly Bulletin Articles, Central Bank of Ireland, pages 85-108, February.
- Kennedy, Gerard & McIndoe Calder, Tara, 2011. "The Irish Mortgage Market: Stylised Facts, Negative Equity and Arrears," Research Technical Papers 12/RT/11, Central Bank of Ireland.
- Kathleen W. Johnson & Geng Li, 2007. "Do high debt payments hinder household consumption smoothing?," Finance and Economics Discussion Series 2007-52, Board of Governors of the Federal Reserve System (U.S.).
- Reamonn Lyndon & Yvonne McCarthy, 2013. "What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears," The Economic and Social Review, Economic and Social Studies, vol. 44(1), pages 117-150.
- Lydon, Reamonn & McCarthy, Yvonne, 2011. "What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears," Research Technical Papers 14/RT/11, Central Bank of Ireland.
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