IDEAS home Printed from https://ideas.repec.org/p/nbb/reswpp/202103-397.html

A bigger house at the cost of an empty fridge? The effect of households’ indebtedness on their consumption:Micro-evidence using Belgian HFCS data

Author

Listed:
  • Philip Du Caju

    (, Economics and Research Department, NBB)

  • Guillaume Périlleux

    (Université libre de Bruxelles (SBS-EM : CEB andECARES), Brussels, Belgium)

  • François Rycx

    (Université libre de Bruxelles (SBS-EM : CEB and DULBEA), IRES, humanOrg, GLO & IZA, Brussels, Belgium)

  • lan Tojerow

    (Université libre de Bruxelles (SBS-EM : CEB and DULBEA) & IZA, Brussels, Belgium)

Abstract

This paper investigates the potentially non-linear relation between households' indebtedness and their consumption between 2010 and 2014 in Belgium. To do so, we use panel data from the two waves of the Household Finance and Consumption Survey. Unlike previous studies, we find a negative effect of households' indebtedness on their consumption, even in the absence of any negative shock on their assets. Our findings suggest that, without such a shock, it is the day-to-day sustainability of the debt, rather than its overall sustainability, that leads households to reduce their consumption. To explore potential non-linearities in this effect, we perform a threshold analysis, whose results suggest that households should not have a debt-service-to-income ratio greater than 30% as this leads to a substantial reduction of their consumption. The effect appears to be robust to various specifications, including the inclusion of other European countries, to result from a trade-off between housing and consumption, and to be more prevalent among more fragile households.

Suggested Citation

  • Philip Du Caju & Guillaume Périlleux & François Rycx & lan Tojerow, 2021. "A bigger house at the cost of an empty fridge? The effect of households’ indebtedness on their consumption:Micro-evidence using Belgian HFCS data," Working Paper Research 397, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:202103-397
    as

    Download full text from publisher

    File URL: https://www.nbb.be/fr/articles/bigger-house-cost-empty-fridge-effect-households-indebtedness-their-consumption-micro
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:nbb:reswpp:202103-397. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bnbgvbe.html .

    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.