IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/18214.html

Fisher Dynamics, Monetary Policy, and Household Indebtedness

Author

Listed:
  • Fagereng, Andreas
  • Gulbrandsen, Magnus A.H.
  • Holm, Martin Blomhoff
  • Natvik, Gisle

Abstract

Growth in household debt-to-income ratios can be attributed to nominal debt changes or “Fisher dynamics†due to interest income and expenses, real income growth, and inflation. With microdata covering the universe of Norwegian households for more than 20 years, we decompose the importance of these channels for how debt-to-income ratios evolve over time and respond to monetary policy shocks. On average, debt changes outsize Fisher dynamics, but among highly leveraged households Fisher dynamics dominate. After interest rate hikes, debt changes and Fisher dynamics pull in opposite directions, with the former dominating, leading to a decline in debt-to-income ratios. This pattern is consistent across sub-groups, including highly indebted households, recent movers, households facing liquidity constraints, and households facing high unemployment risk.

Suggested Citation

  • Fagereng, Andreas & Gulbrandsen, Magnus A.H. & Holm, Martin Blomhoff & Natvik, Gisle, 2023. "Fisher Dynamics, Monetary Policy, and Household Indebtedness," CEPR Discussion Papers 18214, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:18214
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP18214
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:18214. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.