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The role of household debt heterogeneity on consumption: Evidence from Japanese household data

Jouchi Nakajima

No 736, BIS Working Papers from Bank for International Settlements

Abstract: This paper estimates the impact of household debt on consumption behaviour using data from the Japanese Preference Parameters Study. Covering the 2005-13 period, the survey is the first of its kind for Japan. It features responses to forward-looking questions about key risks to income, shedding light on the motives for household savings behaviour. The analysis finds that household marginal propensities to consume (MPCs) were significantly higher for highly-indebted Japanese households than for those with little-to-no debt - a type of variation that is consistent with findings for other countries. The evidence points to a significant precautionary saving motive by Japanese households, with savers particularly concerned about (unlikely) future unemployment spells and longevity risks.

Keywords: household debt; marginal propensity to consume; precautionary saving motive (search for similar items in EconPapers)
JEL-codes: D14 D81 D84 E21 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018-07
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