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Has the Rise in Debt Made Households More Vulnerable?

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  • Nathalie Girouard
  • Mike Kennedy
  • Christophe André

Abstract

This paper reviews, for a number of OECD economies, macroeconomic developments in household balance sheets over the past two decades. The main findings show that the rise in household debt to historical levels has been driven by a combination of favourable financial conditions and buoyant housing markets. There have also been a number of supply-side innovations in credit markets that have eased the access to credit for lower income borrowers and reduced financial constraints for first-time homebuyers. Total household net wealth has risen and provided households with a financial cushion against a negative shock. That said, households in a number of countries have leveraged balance sheets and the sensitivity to house price and interest rate developments has likely increased. The paper then examines micro level information which suggests that most of the debt is held by households better able to manage it. In particular, the major part of debt is held by higher-income households, who also spend a smaller proportion of their disposable income servicing debts. Lower-income households, with less ability to service debt, do not hold that much and, as such, the spill over effects from this group to the rest of the economy are perhaps not large. Whether the situation remains benign or not is discussed in the final section of the paper. Estimates presented point to significant effects of changes in net wealth on household saving rates in a large number of the countries studied. Les ménages sont-ils plus vulnérables du fait de leur endettement croissant? Cette étude examine pour un certain nombre de pays de l’OCDE, l’évolution macroéconomique des bilans des ménages depuis deux décennies. Le fait que l’endettement des ménages, en particulier sous la forme d’emprunts hypothécaires atteigne des niveaux records dans plusieurs pays tient à des conditions financières favorables et au dynamisme du marché du logement. En outre, un certain nombre d’innovations sont apparues du côté de l’offre sur le marché du crédit et ont facilité l’emprunt pour les titulaires de bas revenus tout en allégeant les contraintes financières pour les primo-acquéreurs. De plus, le patrimoine net des ménages a aussi cru et permet de protéger financièrement les ménages en cas de choc négatif. Cela étant, l’effet de levier des ménages semblent important dans plusieurs pays et la sensibilité à l’évolution des prix des logements et des taux d’intérêt s’est probablement accentuée. L'étude analyse ensuite des informations microéconomiques et montrent que la majeure partie de l’endettement est le fait des ménages les mieux à même de le gérer. En particulier, la dette a été surtout contractée par les ménages à revenu élevé, qui affectent une plus faible proportion de leur revenu disponible au service de leur dette. Les ménages à bas revenu, dont la capacité de service de la dette est moindre, ne représentent pas une aussi forte proportion de l’endettement, de sorte que l’impact de la situation de cette catégorie sur le reste de l’économie n’est sans doute pas très marqué. Les conséquences de ce phénomène sont discutées dans la dernière partie de cette étude. Les estimations suggèrent des effets de richesse important sur le taux d'épargne des ménages dans plusieurs pays.

Suggested Citation

  • Nathalie Girouard & Mike Kennedy & Christophe André, 2006. "Has the Rise in Debt Made Households More Vulnerable?," OECD Economics Department Working Papers 535, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:535-en
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    File URL: http://dx.doi.org/10.1787/352035704305
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    Cited by:

    1. Thorvardur Tjörvi Ólafsson & Karen Á. Vignisdóttir, 2012. "Households’ position in the financial crisis in Iceland. Analysis based on a nationwide household-level database," Economics wp59, Department of Economics, Central bank of Iceland.
    2. Alena Bicakova & Zuzana Prelcova & Renata Pasalicova, 2010. "Who Borrows and Who May Not Repay?," Working Papers 2010/10, Czech National Bank, Research Department.
    3. Atalay, Kadir & Whelan, Stephen & Yates, Judith, 2013. "Housing Wealth and Household Consumption: New Evidence from Australia and Canada," Working Papers 2013-04, University of Sydney, School of Economics.
    4. Christine Whitehead, 2012. "Discussion of Property Market Cycles as Paths to Financial Distress," RBA Annual Conference Volume,in: Alexandra Heath & Frank Packer & Callan Windsor (ed.), Property Markets and Financial Stability Reserve Bank of Australia.
    5. Engelbert Stockhammer, 2012. "Financialization," Chapters,in: Handbook of Critical Issues in Finance, chapter 17, pages i-ii Edward Elgar Publishing.
    6. Kukk, Merike, 2016. "How did household indebtedness hamper consumption during the recession? Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 764-786.
    7. repec:clr:wugarc:y:2011:v:37i:3p:378 is not listed on IDEAS
    8. Jörg Bibow, 2010. "Alternative Strategien der Budgetkonsolidierung in Österreich nach der Rezession," IMK Studies 03-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Andrew Coleman & Grant Scobie, 2009. "A Simple Model of Housing Rental and Ownership with Policy Simulations," Working Papers 09_08, Motu Economic and Public Policy Research.
    10. Hein, Eckhard, 2012. "Finance-dominated capitalism, re-distribution and the financial and economic crises: A European perspective," IPE Working Papers 14/2012, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    11. Zuzana Brixiova & Laura Vartia & Andreas Woergoetter, 2009. "Capital Inflows, Household Debt And The Boom Bust Cycle In Estonia," William Davidson Institute Working Papers Series wp965, William Davidson Institute at the University of Michigan.
    12. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
    13. Engelbert Stockhammer & Rafael Wildauer, 2016. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1609-1634.
    14. 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.
    15. Nikolay Hristov & Oliver Hülsewig & Timo Wollmershäuser, 2014. "Financial Frictions and Inflation Differentials in a Monetary Union," Manchester School, University of Manchester, vol. 82(5), pages 549-595, September.
    16. Engelbert Stockhammer, 2010. "Financialization and the Global Economy," Working Papers wp240, Political Economy Research Institute, University of Massachusetts at Amherst.
    17. Christophe André, 2010. "A Bird's Eye View of OECD Housing Markets," OECD Economics Department Working Papers 746, OECD Publishing.
    18. Alan Walks, 2014. "From Financialization to Sociospatial Polarization of the City? Evidence from Canada," Economic Geography, Clark University, vol. 90(1), pages 33-66, January.
    19. John N. Muellbauer, 2007. "Housing, credit and consumer expenditure," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 267-334.
    20. Engelbert Stockhammer, 2011. "Polarisierung der Einkommensverteilung als strukturelle Ursache der gegenwärtigen Finanz- und Wirtschaftskrise," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 37(3), pages 378-402.
    21. Christian Beer & Martin Schürz, 2007. "Characteristics of Household Debt in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 58-79.
    22. Eckhard Hein, 2013. "The crisis of finance-dominated capitalism in the euro area, deficiencies in the economic policy architecture, and deflationary stagnation policies," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 36(2), pages 325-354.
    23. Nicolas Albacete & Pirmin Fessler & Martin Schürz, 2012. "Risk Buffer Profiles of Foreign Currency Mortgage Holders," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 23, pages 58-71.
    24. Katherine Henderson & Grant M. Scobie, 2009. "Household Debt in New Zealand," Treasury Working Paper Series 09/03, New Zealand Treasury.
    25. Michael Ball, 2010. "Critical Commentary. Cities and Housing Markets: Changes and Continuities in the Aftermath of the 2007—08 World Financial Crisis," Urban Studies, Urban Studies Journal Limited, vol. 47(5), pages 931-944, May.

    More about this item

    Keywords

    actifs des ménages; endettement des ménages; household assets; household debt; housing market; marché des logements;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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