How did household indebtedness hamper consumption during the recession? Evidence from micro data

Kukk, Merike

doi:10.1016/j.jce.2015.07.004

Cited by 41 publications

(29 citation statements)

References 48 publications

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“…Over-indebtedness can also indirectly affect poverty: household expenditure drives the economy, but households with high debt spend less, thus subduing growth (Dynan, 2012;Kukk, 2014;Albuquerque & Krustev, 2015). Over-indebtedness indicators proposed by Davydoff et al (2008) include assessing high debt service, which pushes households below the poverty threshold.…”

Section: Related Literaturementioning

confidence: 99%

The threshold effects of household indebtedness on multidimensional poverty

Ntsalaze

Ikhide

2017

IJSE

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DeclarationBy submitting this dissertation electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification.This dissertation includes two published and one accepted but not yet published original papers in peer-reviewed international journals. The fourth paper representing chapter eight is ready for submission for peer review. The development and writing of the papers (published and unpublished) were the principal responsibility of myself and, for each of the cases where this is not the case, a declaration is included in the dissertation indicating the nature and extent of the contributions of co-authors. AbstractGlobal household indebtedness has reached unprecedented levels over the past few decades.The household sector has had to cope with significant losses in income and wealth as well as the burden of debt service since the beginning of the financial crisis. Research focus on this phenomenon, together with its social implications, has grown. This study uses the National Income Dynamics Study (NIDS) data to empirically investigate the effects of household debt on multidimensional poverty. This was achieved through four independent research papers meant to address different angles of the subject. Chapter 5 provides a snapshot of the prevalence of over-indebtedness, using various international indicators and the National Credit Regulator (NCR) indicator, and describes which households are over-indebted. A total of eight percent of South African households are overindebted, and 61.4 percent of those households are found in the lowest income category (R0 -R2 000), spending more than 45 percent of their household income on debt repayments, which is beyond levels that are considered sustainable. The alarming revelation is that, according to the unsecured debt indicator, 15.2 percent of households are over-indebted, while 11 percent of households are driven below the relative income poverty line after making debt repayments. Stellenbosch University https://scholar.sun.ac.za 3The racial distribution indicates that households headed by Africans are overrepresented (79%).Most over-indebted households are found amongst those who own their places of residence (78.6%), do not receive government grants (71.7%), are male (53.8%), and have an unemployed household head (53.5%).Chapter 6 examines the presence of thresholds in the debt-poverty nexus at micro level, i.e. the tipping point above which debt is associated with more multidimensional poverty. By applying the Generalised Additive Model (GAM) using regression splines, the study finds the existence of critical tipping points between household debt service-to-income ratio and multidimensional poverty along with other explanatory variables (age...

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Section: Related Literaturementioning

confidence: 99%

The threshold effects of household indebtedness on multidimensional poverty

Ntsalaze

Ikhide

2017

IJSE

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“…We also control for the children and elderly ratios, following Li and Chen (2014), to capture the demography-induced consumption difference. Moreover, according to Dynan (2012) and Kukk (2016), household income and asset variables largely reflect the family's economic situation and determines its consumption ability. Thus, we include them in our model.…”

Section: Data and Empirical Methodologymentioning

confidence: 99%

Pandemic, Mobile Payment, and Household Consumption: Micro-Evidence from China

Liu

Pan

Yin

2020

Emerging Markets Finance and Trade

119

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The novel coronavirus disease (COVID-19) outbreak has significantly affected many lives, as indicated by widespread lockdowns and restrictions. This study investigates the impact of COVID-19 on Chinese household consumption. It employs the China Household Finance Survey (CHFS) data and finds that there was a significant decline in household consumption during the outbreak period. Further heterogeneity analysis shows that the pandemic suppresses consumption in urban households; rural households are, however, less affected. Moreover, mobile payment promotes urban household consumption during the pandemic, while rural households remain unaffected. KEYWORDS COVID-19 pandemic; household consumption; mobile payment; urban-rural gap JEL CLASSIFICATION D12; E21; G51.

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“…It is often argued that consumer credit constitutes a relatively small part of lending to households and that, in empirical research, attention should be focused on mortgage determinants (Crowe, Dell'Ariccia, Igan, & Rabanal, 2011;EEAG, 2011;IMF, 2011a). As a corollary, excess household indebtedness limited consumption during the 2008-2010 economic downturn and worsened the subsequent credit crunch (Coudert & Pouvelle, 2010;Kukk, 2015). That diminishes the relative importance of consumer lending as a factor that may undermine financial stability.…”

Section: Introductionmentioning

confidence: 99%

“…First, the experience of the Baltic states suggests that in the early stages of a convergence process, the increase in consumer lending can be significant (around 1% of GDP annually), thus amplifying the credit boom observed in the remaining segments of lending. As a corollary, excess household indebtedness limited consumption during the 2008-2010 economic downturn and worsened the subsequent credit crunch (Coudert & Pouvelle, 2010;Kukk, 2015). Second, rapidly rising consumer loans boost domestic demand and increase inflationary pressure, which diminishes domestic competitiveness.…”

Section: Introductionmentioning

confidence: 99%

Economic, institutional, and socio‐cultural determinants of consumer credit in the context of monetary integration

Borowski

Jaworski

Olipra

2018

International Finance

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We investigated the determinants of consumer credit in relation to nominal GDP in 23 EU countries using panel regressions for 1997–2014. Our contribution to existing research is evidence that both higher density of bank units and greater concentration of the banking sector lead to higher consumer lending. Our results show that the consumer credit to GDP ratio decreases when banking supervision becomes a part of a politically independent central bank. This signals that access to consumer credit is more difficult when supervision is independent from government. Finally, we find that joining the Eurozone boosts consumer lending. This result is consistent with the permanent income hypothesis, which states that households’ current consumption is determined not only by their current income but also by the income that they expect to earn. Our results can be used to increase the effectiveness of macroprudential policy in avoiding consumer lending booms and ensuring financial stability.

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How did household indebtedness hamper consumption during the recession? Evidence from micro data

Cited by 41 publications

References 48 publications

The threshold effects of household indebtedness on multidimensional poverty

The threshold effects of household indebtedness on multidimensional poverty

Pandemic, Mobile Payment, and Household Consumption: Micro-Evidence from China

Economic, institutional, and socio‐cultural determinants of consumer credit in the context of monetary integration

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