How to Avoid Household Debt Overhang? An Analytical Framework and Analysis for India

Yoshino Naoyuki and Gupta Prachi
Additional contact information
Yoshino Naoyuki: Professor, Emeritus, Keio University, Tokyo, Japan
Gupta Prachi: Temple University, Tokyo, Japan

International Review of Financial Consumers, 2020, vol. 5, issue 1, 1-11

Abstract: In this paper we develop an analytical framework using the household utility maximization approach to model stability conditions to avoid household debt overhang. Our theoretical framework suggests that household debt stability is a function of five factors, namely the rate of interest, period of lending, income growth, loan-to-income ratio, and households’ disutility from borrowing. Further, we apply our analytical model to the case of India and estimate household debt stability conditions for Indian households under various scenarios to estimate the ceiling borrowing ratios below which households can avoid the risk of running into a debt overhang problem.

Keywords: debt overhang; household finance; household borrowing (search for similar items in EconPapers)
JEL-codes: C13 C15 C62 D10 H31 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.36544/irfc.2020.5-1.1 (text/html)

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:vrs:irfinc:v:5:y:2020:i:1:p:1-11:n:1001

DOI: 10.36544/irfc.2020.5-1.1

Access Statistics for this article

International Review of Financial Consumers is currently edited by Sharon Tennyson

More articles in International Review of Financial Consumers from Sciendo
Bibliographic data for series maintained by Peter Golla ().