Post Financial Crisis and Macroeconomic Fundamentals on Household Debt in Advanced Economies

Siti Aminah Mainal ()
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Siti Aminah Mainal: Faculty of Business Management, Universiti Teknologi MARA. Author-2-Name: Catherine S F Ho Author-2-Workplace-Name: Arshad Ayub Graduate Business School, Universiti Teknologi MARA, Malaysia Author-3-Name: Jamaliah Mohd Yusof Author-3-Workplace-Name: Faculty of Business Management, Universiti Teknologi MARA.

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Abstract: "Objective � The unwarranted household debt initiated the global financial crisis which led to severe worldwide financial instability. Deleveraging process which has been taking place since the crisis has been slow and there is no quick fix to the debt issue. The lack of study on the effect of financial crisis on household debt justifies the objective to investigate macroeconomic fundamentals and financial crisis on household debt. Methodology/Technique � This study applies panel data analysis in ten advanced economies from 2001 to 2013. The random effect (RE) generalized least square estimator is used in the regression to examine macroeconomic factors and post financial crisis period as control variable on household debt. Findings � Findings confirm that post financial crisis period has significant negative effect on household debt which affirmed the deleveraging process in most advanced economies. Economic growth and household disposable income too have negative relation with household debt. Nonetheless, macroeconomic factors such as inflation, housing price and household consumption encourage household debt in advanced economies. Novelty � This study suggests that empirical evidence support that household avert from borrowing post financial crisis. Intensification of housing price and other consumption expenditure, if left unrestrained, may elicit another debt crisis. These are challenges faced by policy makers to curb household debt which entail risks for households, the financial system and the wider economy."

Keywords: Household Debt; Post Financial Crisis; Macroeconomic Factors. (search for similar items in EconPapers)
JEL-codes: G01 G02 (search for similar items in EconPapers)
Pages: 6
Date: 2017-06-16
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Published in Journal of Finance and Banking Review, Volume 2, Issue 3

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