## Rising Household Debt: What It Means for Growth and Stability

_IMF Blog, October 3, 2017_

## Source details

**Canonical URL:** [Rising Household Debt: What It Means for Growth and Stability](https://www.imf.org/en/blogs/articles/2017/10/03/rising-household-debt-what-it-means-for-growth-and-stability)

## Other formats

- [Markdown version](/en/blogs/articles/2017/10/03/rising-household-debt-what-it-means-for-growth-and-stability/index.md)
- [Structured JSON version](/en/blogs/articles/2017/10/03/rising-household-debt-what-it-means-for-growth-and-stability/index.json)
- [Bundle manifest](/en/blogs/articles/2017/10/03/rising-household-debt-what-it-means-for-growth-and-stability/bundle-manifest.json)

## Bibliographic details
- Authors: Nico Valckx
- Published: October 3, 2017

---

### Summary of central findings
- Household debt (including mortgage debt) has been rising since the global financial crisis.
- Since 2008, household debt as a proportion of gross domestic product has grown significantly in a sample of 80 countries.
  - Among advanced economies, the median debt ratio rose to 63 percent last year from 52 percent in 2008.
  - Among emerging economies, it increased to 21 percent from 15 percent.
- There is a tradeoff between short-term benefits and medium-term costs of rising household debt:
  - In the short term, increased household debt is likely to boost economic growth and employment.
  - In three to five years, those effects are reversed: growth is slower than it would have been otherwise, and the odds of a financial crisis increase.
  - These adverse effects are stronger at the higher levels of debt typical of advanced economies and weaker at lower levels prevailing in emerging markets.

### Quantitative effects identified
- A 5 percentage-point increase in the ratio of household debt to GDP over a three-year period forecasts a 1.25 percentage-point decline in inflation-adjusted growth three years in the future.
- Higher household debt is associated with significantly higher unemployment up to four years ahead.
- A 1 percentage point increase in debt raises the odds of a future banking crisis by about 1 percentage point.
- Baseline probability of a banking crisis, without any increase in debt, is 3.5 percent.

### Mechanisms and dynamics
- Short-term mechanism: Households take on debt to buy durables (homes, cars), boosting demand, employment, and activity in construction and manufacturing.
- Medium-term mechanism: Highly indebted households may cut back spending to repay loans, reducing aggregate demand.
- Tail risk: A sudden shock (for example, a decline in home prices) can trigger credit defaults and a systemic financial crisis, as seen in 2008.

### Policy implications and measures to mitigate risks
- Structural and macroeconomic settings that reduce vulnerability:
  - Countries with less external debt are better placed to weather rising household debt.
  - Countries with floating exchange rates are better positioned to absorb shocks.
  - Financially more developed countries have greater capacity to manage consequences.
- Regulatory and distributional policies that help:
  - Better financial-sector regulations reduce risk.
  - Lower income inequality also mitigates vulnerability.
- Direct measures to moderate household debt growth:
  - Modify the down payment required to purchase a house.
  - Limit the fraction of household income that can be devoted to debt repayments.
- Overall: Good policies, institutions, and regulations can substantially ease the tradeoff between short-term benefits and medium-term costs; conversely, countries with poor policies are more vulnerable even if initial debt levels are low.

*Rising Household Debt: What It Means for Growth and Stability — IMF blog, October 3, 2017*

---

## Content in this bundle

- **家庭债务增加：对经济增长和稳定意味着什么; IMF博客; 2017年10月3日**
  - [家庭债务增加：对经济增长和稳定意味着什么; IMF博客; 2017年10月3日 (Markdown version)](/external/chinese/np/blog/2017/100317bc.pdf.md){rel="alternate" type="text/markdown"}
  - [家庭债务增加：对经济增长和稳定意味着什么; IMF博客; 2017年10月3日 (PDF)](/external/chinese/np/blog/2017/100317bc.pdf){rel="external" type="application/pdf"}
- **家計債務の上昇：経済の成長と安定への影響は？; Nico Valckx ; IMF ブログ 2017年10月3日掲載**
  - [家計債務の上昇：経済の成長と安定への影響は？; Nico Valckx ; IMF ブログ 2017年10月3日掲載 (Markdown version)](/external/japanese/np/blog/2017/100317aj.pdf.md){rel="alternate" type="text/markdown"}
  - [家計債務の上昇：経済の成長と安定への影響は？; Nico Valckx ; IMF ブログ 2017年10月3日掲載 (PDF)](/external/japanese/np/blog/2017/100317aj.pdf){rel="external" type="application/pdf"}
- **Увеличение задолженности домашних хозяйств — влияние на рост и стабильность**
  - [Увеличение задолженности домашних хозяйств — влияние на рост и стабильность (Markdown version)](/external/russian/np/blog/2017/100317ar.pdf.md){rel="alternate" type="text/markdown"}
  - [Увеличение задолженности домашних хозяйств — влияние на рост и стабильность (PDF)](/external/russian/np/blog/2017/100317ar.pdf){rel="external" type="application/pdf"}

---

## References

- [عربي](https://blog-montada.imf.org/?p=5622)
- [Españo](https://blog-dialogoafondo.imf.org/?p=8401)
- [https://www.imf.org/wp-content/uploads/2017/10/BLOG-1024x600-GFSR-CH3-house-sold-Louoates-iStock-134252386.jpg](https://www.imf.org/wp-content/uploads/2017/10/BLOG-1024x600-GFSR-CH3-house-sold-Louoates-iStock-134252386.jpg)
- [Global Financial Stability Report](http://www.imf.org/en/Publications/GFSR/Issues/2017/09/27/global-financial-stability-report-october-2017)
- [https://www.imf.org/wp-content/uploads/2017/10/ENG_Sept_27_GFSR_ch2Chart1-10.jpg](https://www.imf.org/wp-content/uploads/2017/10/ENG_Sept_27_GFSR_ch2Chart1-10.jpg)
- [https://www.imf.org/wp-content/uploads/2017/10/ENG_Sept_27_GFSRch2Chart2-4.jpg](https://www.imf.org/wp-content/uploads/2017/10/ENG_Sept_27_GFSRch2Chart2-4.jpg)
- [https://www.imf.org/wp-content/uploads/2017/10/ENG_Sept_27_GFSRch2Chart3-2.jpg](https://www.imf.org/wp-content/uploads/2017/10/ENG_Sept_27_GFSRch2Chart3-2.jpg)

_Source: https://www.imf.org/en/blogs/articles/2017/10/03/rising-household-debt-what-it-means-for-growth-and-stability_