Managing Household Debt in Croatia

Using the panel data from the 1983–1989 Survey of Consumer Finances, this research examines the shifts in households' income and debt quintiles and changes in respondents' attitudes toward credit. Households exhibited considerable income mobility during the 1980s, almost as much as during the more volatile decade of the 1970s previously reported by Duncan (1986). Except for a committed group of “no debt” households, there was even more mobility in households' debt status, that is, a majority of households were in a different debt quintile in 1989 than in 1983. Respondents' attitudes toward debt also changed considerably with more respondents' becoming more negative toward credit than more positive. Trend analyses of American households' debt underestimate the extent and variability of such changes.

<ns2:p>As of year-end 2019, nonfinancial business debt (BD) and household debt (HD) as a share of GDP were at similar levels of around 74 percent, and yet Federal Reserve Financial Stability Report suggested that BD posed greater risks to financial stability than HD. Since the onset of the pandemic, the size of aggregate BD has increased considerably as a result of roughly $1.25 trillion of new issuance, while HD has grown by less than $100 billion. This note looks through the lens of fire-sale risks to show why nonfinancial BD is more concerning for financial stability than the HD.</ns2:p>

This paper analyses the relationship between household debt and income inequality in South Africa for the period 1980–2021. We use two measures of inequality and estimate a vector error correction model (VECM) which includes household debt, inequality, and other macroeconomic variables. To test the robustness of our results, single equation models are used, which estimate household debt as a function of inequality and macroeconomic factors. We employ two measures of inequality, namely Gini coefficient and ratio of top and bottom income earners’ proportion of income. Furthermore, we use both household debt as a percentage of disposable income and household debt service costs as dependent variables in single equation regressions. The study finds a negative and significant relationship between household debt and income inequality in the long run, which contradicts the Rajan hypothesis in the South African case. Rather, we find that inequality in South Africa creates a bias in debt allocation towards high-income earners, whose incomes can easily absorb the extra debt (reduced ratio of debt to disposable income). There are therefore no socio-equity considerations in South African credit markets. We find growth in gross domestic product (GDP) per capita also has a moderating effect on the relationship between household debt and income inequality. High GDP per capita growth in the presence of high inequality reduces the impact of inequality on household debt and vice-versa. All other control variables take expected signs. These results are robust to changes in the inequality or household debt measures.

Households in some European countries increased their indebtedness massively over the past 20 years. Besides household debt, also government debt and corporate debt are in some countries at levels not seen before. While there is a common agreement that these high debt levels are not sustainable there is fewer consensus about the effect of changes in debt and especially debt levels on aggregate demand. Based on a cross country study of 18 European countries we show that there is a strong link between household sector debt and aggregate demand. We strengthen these results by an analysis for Spanish provinces. The level of household debt in the Spanish provinces is highly significant for changes in aggregate demand that translated into increasing unemployment in these regions during the recession following the financial crisis of 2007/08. We find that on aggregate about 1/3 of the increase in Spanish unemployment can be traced back to high household debt levels.

The rapid financialization induced scholars’ attention to the fertility consequences of household debt in developed countries, but it remains unclear whether and how household debt affects fertility behavior in developing countries. Using data from the China Family Panel Studies from 2010 to 2022, this study investigated the effect of household debt in household financialization on fertility behavior in the Chinese context and explored potential mechanisms in the debt–fertility linkage. Results showed that debt expansion generated substantial fertility-decreasing effects among households. The adverse fertility outcomes of indebtedness were caused by a deterioration of physical and psychological health and marital relationships. The negative influence of household debt on fertility behavior was largely driven by mortgage debt rather than non-mortgage debt in China. The negative fertility impact of debt, particularly mortgage debt, was more prominent in urban households than in rural households. These findings demonstrated that household debt expansion was a contributor to low fertility in contemporary China. Our study extended to the literature on fertility and financialization by revealing the role of finance as a structural force in shaping demographic behavior.

We unbundle the effect of debt on economic growth using a new panel data set sourced from Vague (2014, The next economic disaster: Why it's coming and how to avoid it. Philadelphia, PA: University of Pennsylvania Press) for 48 countries over the period 1961–2015. We distinguish between public, private, household and nonfinancial corporation (NFC) debt. We use the panel vector autoregressive approach, Granger causality tests and impulse response to establish causality. We also test the heterogeneity in the debt–growth relationship across developed and developing countries. In our full sample of countries, all types of debt appear to be harmful to economic growth. The negative effect of public debt appears to be uniform across developed and developing countries, although the impact is much stronger on developed countries. Household debt appears to be expansionary in developing countries whereas contractionary in developed countries. Nonfinancial corporation debt appears to have no impact on developing countries but negative impact on developed countries. Finally, total debt (i.e., the sum of public, household and NFC debt) has a negative impact on growth in developed countries, but no impact is detected in the case of developing countries.

The United States leads globally in incarceration. Incarceration can disrupt families in both immediate and long-term ways, including finances and mental illness. We examined the relationship between father incarceration during adolescence and the development of mental illness in adulthood as well as the relationship of household assets and debts in relation to the mental illness outcomes. Wave IV data of the National Longitudinal Study of Adolescent to Adult Health were used with a final analytic sample of 2129 participants. Data were analyzed using MANOVA in Stata 13.1. The findings indicated that biological father incarceration correlates with more adolescent mental illness. Enhanced model residuals were also significant for father incarceration, household assets, and household debts. Incarceration of biological fathers correlates with poorer mental health outcomes. Household assets and debts correlate with changes in adolescent outcomes as well, giving us more target areas for intervention development and testing. Clinically, assessing for adolescent experiences with father incarceration may be useful in supporting improved mental health over the life course. Policy work should give more attention to promotion of health and well-being of adolescents via reduction of the negative experience of fathers serving and/or having served time in prison. More discussion on family-level assets and debts is warranted to promote health and well-being for adolescents and adults.

This article investigates the macroeconomic determinants of household debt in developed economies using a sample comprising 26 OECD countries for the period of 2002q1–2020q4. By resorting to the unconditional quantile regression, we find relevant asymmetries in the response of household debt. According to our results, economic growth leads to lower household debt, but the beneficial effect decreases as the level of household debt increases. Inflation lowers household borrowing only if the level of debt is high. Higher house prices lead to higher household debt, with the impact becoming stronger as the level of debt is higher. Investments go hand in hand with household debt, and higher investments lead to higher levels of borrowing, even when household debt is already high. Mortgage credit interest rates are positively linked with household debt, starting with higher debt levels. A rising unemployment rate leads to lower household debt, but the link becomes weaker as the level of debt increases. Higher public expenditures are generally associated with lower household debt. In addition, we find that household debt exhibits very powerful autoregressive behavior, being difficult to reduce rapidly in the case of need.

In the past decades, household debt in both developed and developing countries have been increasing. With an increase in the standard of living, household debt is also bound to increase. This paper examines the cointergation and causal link among household disposable income, household savings, debt service ratio, lending interest rate, consumer price index and household debt in South Africa. An Autoregressive Distributed Lag and Granger causality techniques was used to analyse data collected from the South African Reserve Bank and Quantec from 1984 to 2014. The results of Autoregressive Distributed Lag test revealed cointegrating relationships between household debt and debt service ratio as well as household debt and lending interest rate. However, there is no long run cointegrating relationship between household disposable income, household savings and consumer price index with household debt. The Granger causality results revealed that household disposable income, household savings, debt service ratio, lending interest rate, consumer price index do Granger cause household debt in South Africa. Policy makers should thus target these variables in order to reduce household debt in South Africa.

In many countries, household debt increased from the 1990s until the global financial crisis of 2007–2008 and then stagnated with the Great Recession, the euro-area sovereign debt crisis and deleveraging. In spite of these common trends, differences in national household debt/disposable income ratios are evident. This paper studies the determinants of household debt using a dataset of 33 countries and taking into account both demand-side and supply-side factors. The econometric exercises, covering the period 1995–2016, yield the following results. First, there is a positive link between household debt and both household wealth and house price growth. Second, the quality of bankruptcy laws relates positively to household debt, whereas longer insolvency resolution times are associated with lower household debt. Third, Anglo-Saxon legal origin and Scandinavian legal origin have a stronger link with household debt than French and German legal origin. Fourth, household debt is higher in countries with social-democratic and liberal welfare models than in conservative and Eastern European welfare states. Fifth, the ratio of public debt to GDP displays a negative association with private debt. Last, the effect of saving on household debt is significant only in the years of household deleveraging, i.e. after the global financial crisis. While the effect of demand-side variables is unstable over time, supply-side variables appear to be more persistent in determining the level of household debt.

Objective - The unwarranted household debt initiated the global financial crisis which led to severe worldwide financial instability. Deleveraging process which has been taking place since the crisis has been slow and there is no quick fix to the debt issue. The lack of study on the effect of financial crisis on household debt justifies the objective to investigate macroeconomic fundamentals and financial crisis on household debt. Methodology/Technique - This study applies panel data analysis in ten advanced economies from 2001 to 2013. The random effect (RE) generalized least square estimator is used in the regression to examine macroeconomic factors and post financial crisis period as control variable on household debt. Findings - Findings confirm that post financial crisis period has significant negative effect on household debt which affirmed the deleveraging process in most advanced economies. Economic growth and household disposable income too have negative relation with household debt. Nonetheless, macroeconomic factors such as inflation, housing price and household consumption encourage household debt in advanced economies. Novelty - This study suggests that empirical evidence support that household avert from borrowing post financial crisis. Intensification of housing price and other consumption expenditure, if left unrestrained, may elicit another debt crisis. These are challenges faced by policy makers to curb household debt which entail risks for households, the financial system and the wider economy. Type of Paper: Empirical Keywords: Household Debt; Post Financial Crisis; Macroeconomic Factors. JEL Classification: G01, G02.

In the past decades, household debt in both developed and developing countries have been increasing. With an increase in the standard of living, household debt is also bound to increase. This paper examines the cointegration and causal link among household disposable income, household savings, and debt service ratio, lending interest rate, consumer price index and household debt in South Africa. An Autoregressive Distributed Lag and Granger causality techniques was used to analyse data collected from the South African Reserve Bank and Quantec from 1984 to 2014. The results of Autoregressive Distributed Lag test revealed cointegrating relationships between household debt and debt service ratio as well as household debt and lending interest rate. However, there is no long run cointegrating relationship between household disposable income, household savings and consumer price index with household debt. The Granger causality results revealed that household disposable income, household savings, debt service ratio, lending interest rate, consumer price index do Granger cause household debt in South Africa. Policy makers should thus target these variables in order to reduce household debt in South Africa.

An overwhelming increase in household debt in the last decade has stirred researchers to explore the determinants of this phenomena, especially the role of the labor market. This paper comes to identify these determinants using the macro panel data from Asia Pacific countries for 1994–2016 and dynamic heterogeneous panel data analysis. The empirical results found that household consumption, housing price index, and labor force have a long-run positive relationship with household debt. In contrast, the unemployment rate and dependency ratio have a long-run negative relationship with household debt. This implies that when consumption, housing price, and labor force increase, then the household debt will increase, and when the unemployment rate and dependency ratio increase, the household debt will decrease. Also, in the short-run, public debt does affect private consumption, and it is not different among countries. The labor market, as represented by the unemployment rate, dependency ratio, and labor force, has a strong effect on the household debt in the long-run. Based on these findings, the government should pay more attention to the household debt related to property and commodity markets because they expose the short-run volatility and create problems for the long-term.

The nation has seen its household debt growth rate fall since 2017 due to government efforts to increase household debt, but it is still above economic growth and consumption growth rates, raising interest in household debt. In particular, it would be important to look at the effects of household debt on the real economy at this point as the positive effects on consumption and growth through household debt growth and the burden of repayment of loans persist amid increasing uncertainties in the global economy and the continued slump in the domestic economy. Therefore, this study empirically analyzed the relationship between household debt, consumption and growth using the OLS method and GMM method from the fourth quarter of 2003 to the first quarter of 2019. The results showed that while household debt growth has a positive impact on consumption and economic growth, the ratio of household debt/potential GDP has a negative impact on consumption and growth. This suggests that the rise in household debt will boost consumption and growth with eased liquidity constraints, but the burden of repayment of borrowing from accumulated household debt is likely to increase, constraining consumption and growth. It also confirmed that despite the recent decline in household debt growth, the sluggish domestic economy has led to a further rise in negative contributions to consumption and growth. Thus, from a mid- to long-term perspective, policy measures should be devised to control the pace of household debt and stimulate consumption and economic growth.

This study examines the dynamic relationships between household debt, income, GDP, and income inequality in Thailand, a nation grappling with rising household debt and persistent income disparities. Using a 19-year dataset, the research employs a Bayesian VAR (BVAR) model to explore the interdependencies among these variables and Impulse Response Function (IRF) analysis to evaluate their short-term and long-term adjustments to economic shocks. The findings reveal that household debt exhibits strong persistence and is positively influenced by income inequality, underscoring the role of disparities in driving debt accumulation. Conversely, income and GDP demonstrate resilience, with income positively influenced by GDP and negatively impacted by household debt, reflecting the burden of rising debt on income generation. GDP is shown to play a pivotal role in sustaining economic stability, while income inequality emerges as a persistent structural issue, amplified by household debt. The IRF analysis further reveals that a shock in household debt leads to a temporary decline in income and GDP, followed by stabilization in the medium term. However, income inequality responds positively to debt shocks, highlighting the disproportionate impact on low-income households and the long-term challenges of addressing inequality. The study's findings emphasize the need for targeted policies to manage household debt, promote equitable income distribution, and foster sustainable economic growth. Recommendations include debt restructuring programs, financial literacy campaigns, and progressive taxation to reduce disparities and enhance economic resilience.This research contributes to the understanding of the intricate relationships between debt, income, and inequality, offering insights for policymakers in Thailand and similar economies.