Household Debt, Consumption, and Monetary Policy in Australia

Author/Editor:

Elena Loukoianova ; Yu Ching Wong ; Ioana Hussiada

Publication Date:

April 5, 2019

Electronic Access:

Free Full Text. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper discusses the evolution of the household debt in Australia and finds that while higher-income and higher-wealth households tend to have higher debt, lower-income households may become more vulnerable to rising debt service over time. Then, the paper analyzes the impact of a monetary policy shock on households’ current consumption and durable expenditures depending on the level of household debt. The results corroborate other work that households’ response to monetary policy shocks depends on their debt and income levels. In particular, households with higher debt tend to reduce their current consumption and durable expenditures more than other households in response to a contractionary monetary policy shocks. However, households with low debt may not respond to monetary policy shocks, as they hold more interest-earning assets.

Series:

Working Paper No. 19/76

Subject:

English

Publication Date:

April 5, 2019

ISBN/ISSN:

9781498303767/1018-5941

Stock No:

WPIEA2019076

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

39

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