Macroeconomic Determinants of Household Debt in OECD Countries

This article investigates the macroeconomic determinants of household debt in developed economies using a sample comprising 26 OECD countries for the period of 2002q1–2020q4. By resorting to the unconditional quantile regression, we find relevant asymmetries in the response of household debt. According to our results, economic growth leads to lower household debt, but the beneficial effect decreases as the level of household debt increases. Inflation lowers household borrowing only if the level of debt is high. Higher house prices lead to higher household debt, with the impact becoming stronger as the level of debt is higher. Investments go hand in hand with household debt, and higher investments lead to higher levels of borrowing, even when household debt is already high. Mortgage credit interest rates are positively linked with household debt, starting with higher debt levels. A rising unemployment rate leads to lower household debt, but the link becomes weaker as the level of debt increases. Higher public expenditures are generally associated with lower household debt. In addition, we find that household debt exhibits very powerful autoregressive behavior, being difficult to reduce rapidly in the case of need.