 How did household indebtedness hamper consumption during the recession? Evidence from micro dataJournal of Comparative Economics, 2016, vol. 44, issue 3, 764-786 Abstract: The paper investigates the extent to which household indebtedness suppressed consumption during the economic downturn in 2008–2009. The paper uses a unique quarterly panel dataset containing financial information on over 100 000 individuals. The dataset covers the period 2005–2011, when there were large changes in credit volumes, income and consumption in Estonia, a new EU member country. The estimations show that indebtedness measured by the debt-to-income ratio and the debt service ratio hampers consumption over the whole business cycle. The negative impact of the debt service ratio is, however, substantially stronger during the recession than in the pre-crisis and post-crisis periods, while the negative effect of the debt-to-income ratio is relatively stable over the sample period. The findings suggest that household indebtedness is amplifying the recession and the debt repayment burden indicates the mechanism which is at work. Keywords: Household indebtedness; Debt repayment burden; Debt-to-income ratio; Amplification effect; Recession (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:44:y:2016:i:3:p:764-786 DOI: 10.1016/j.jce.2015.07.004 Access Statistics for this article Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland More articles in Journal of Comparative Economics from Elsevier |
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