{
  "title": "Understanding the Macro-Financial Effects of Household Debt: A Global Perspective",
  "publication": "IMF Working Papers, April 6, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/04/06/understanding-the-macro-financial-effects-of-household-debt-a-global-perspective-45744",
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  "summary": "We confirm the negative relationship between household debt and future GDP growth documented in Mian, Sufi, and Verner (2017) for a wider set of countries over the period 1950–2016. Three mutually reinforcing mechanisms help explain this relationship.",
  "sections": [
    {
      "heading": "Key finding: household debt and future GDP growth",
      "content": "- The negative relationship between household debt and future GDP growth documented in Mian, Sufi, and Verner (2017) is confirmed for a wider set of countries over the period 1950–2016."
    },
    {
      "heading": "Mechanisms explaining the negative relationship",
      "content": "- Debt overhang impairs household consumption when negative shocks hit.\n- Increases in household debt heighten the probability of future banking crises, which significantly disrupts financial intermediation.\n- Crash risk may be systematically neglected due to investors’ overoptimistic expectations associated with household debt booms."
    },
    {
      "heading": "Institutional factors that mitigate the impact",
      "content": "- Flexible exchange rates are found to mitigate the negative impact of household debt on growth.\n- Higher financial development mitigates the impact.\n- Greater financial inclusion mitigates the impact."
    },
    {
      "heading": "Tradeoffs and nuances",
      "content": "- The tradeoff between financial inclusion and stability nuances downside risks to growth.\n\n---\n\n Content in this bundle\n\n- wp1876\n  - wp1876 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1876 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/04/06/understanding-the-macro-financial-effects-of-household-debt-a-global-perspective-45744"
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    "Authors: Adrian Alter, Alan Xiaochen Feng, Nico Valckx",
    "Published: April 6, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484349861.001",
    "The negative relationship between household debt and future GDP growth documented in Mian, Sufi, and Verner (2017) is confirmed for a wider set of countries over the period 1950–2016.",
    "Debt overhang impairs household consumption when negative shocks hit.",
    "Increases in household debt heighten the probability of future banking crises, which significantly disrupts financial intermediation.",
    "Crash risk may be systematically neglected due to investors’ overoptimistic expectations associated with household debt booms.",
    "Flexible exchange rates are found to mitigate the negative impact of household debt on growth.",
    "Higher financial development mitigates the impact.",
    "Greater financial inclusion mitigates the impact.",
    "The tradeoff between financial inclusion and stability nuances downside risks to growth.",
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