Interlinkages Between Household and Corporate Debt in Advanced Economies

Jean-Charles Bricongne and Aurora Mordonu ()
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Aurora Mordonu: European Commission

Open Economies Review, 2017, vol. 28, issue 5, No 11, 1029-1055

Abstract: Abstract This article contributes to the debate on deleveraging in the non-financial private sector. It proposes a framework for assessing the interconnectedness of debt dynamics, in particular deleveraging in the household and in the non-financial corporate sectors, using instrumental techniques for a panel of 36 mostly OECD countries, from 1981 to 2015. Households’ debt developments are positively associated with non-financial corporations’ debt dynamics for the whole sample. Conversely, corporate debt has a positive influence on household debt and in particular during deleveraging episodes and in relatively labour-intensive countries. This is consistent with the functioning of the income channel, in which corporations squeeze their wage bill in order to restore profitability.

Keywords: Deleveraging; Households; Non-financial corporations; Debt (search for similar items in EconPapers)
JEL-codes: E21 E51 G32 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Working Paper: Interlinkages between Household and Corporate Debt in Advanced Economies (2015)
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DOI: 10.1007/s11079-017-9464-x

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