Household leverage and consumption during the Great Depression

Kim Abildgren

Journal of Financial Regulation and Compliance, 2018, vol. 26, issue 2, 287-299

Abstract: Purpose - The purpose of this study is to explore the impact of household leverage on consumption in Denmark during the Great Depression in the 1930s. Design/methodology/approach - A range of consumption functions are estimated on the basis of household-level data from the Expenditure and Saving Survey of 1931. Findings - The estimations show significant negative marginal effects of various measures of leverage on homeowners’ non-durable consumption. The magnitude of the estimated effects suggests that leverage contributed significantly to the economic downturn during the Great Depression by depressing consumer spending of homeowners. Practical implications - Gross debt levels of homeowners are not only of direct importance for financial stability but also have implications for macroeconomic stability, which again might affect the stability of the financial system. These findings seem to be in line with the focus on household leverage in the macroprudential oversight performed by regulators and central banks in many countries. Originality/value - This paper is the first study of the leverage channel in the private consumption function using household micro data from the Great Depression.

Keywords: Consumption; Household micro data; Great Depression; Leverage effect (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
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:eme:jfrcpp:jfrc-03-2017-0035

DOI: 10.1108/JFRC-03-2017-0035

Access Statistics for this article

Journal of Financial Regulation and Compliance is currently edited by Prof John Ashton

More articles in Journal of Financial Regulation and Compliance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().