The Debt‐Payment‐to‐Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys

Kathleen W. Johnson and Geng Li

Journal of Money, Credit and Banking, 2010, vol. 42, issue 7, 1373-1390

Abstract: Liquidity constraints have been proposed as an important explanation for deviations from the rational expectations/permanent income hypothesis. This paper introduces to the liquidity constraint literature the ratio of a household's debt payments to its disposable personal income, the debt service ratio (DSR). We find that a household with a high DSR is significantly more likely to be turned down for credit than other households. Also, the consumption growth of likely constrained households, identified using the DSR along with the liquid‐asset‐to‐income ratio, is significantly more sensitive to past income than that of other households, confirming the DSR's value in identifying constrained households.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
https://doi.org/10.1111/j.1538-4616.2010.00345.x

Related works:
Journal Article: The Debt-Payment-to-Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:42:y:2010:i:7:p:1373-1390

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().