Abstract
This study establishes the stylized facts on the Korean housing market and household balance sheets in South Korea and discusses their macroeconomic implication. Using a household-level panel data for the period of 2001-2012, we find that (1) there are neither deleveraging of household debts nor a sharp decline in house price even during the financial crisis, (2) run-up in household debt in 2000s is led by high-income group, (3) regardless of net worth level, wealth is highly concentrated on illiquid assets such as housing and real estate, (4) the share of wealthy hand-to-mouth households that hold little liquid wealth with owning large amount of illiquid assets is very high compared to the cases of other advanced countries. In addition to these empirical facts, we also estimate the marginal propensity to consume out of a transitory shock and find that the consumption response of high-income group with large amount of illiquid assets is larger in response to external shocks. We briefly discuss the possibility of this group as a source of macroeconomic instability.
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