The Determinants of Household Debt and Balance Sheets in the United Kingdom

33 Pages Posted: 19 Oct 2005

See all articles by Merxe Tudela

Merxe Tudela

Bank of England - Market Infrastructure Division

Garry Young

ESCOE

Date Written: July 2005

Abstract

Household indebtedness has grown sharply in the United Kingdom in recent years. This paper proposes a framework for understanding this based on a model in which households are assumed to plan their lifetime spending rationally, allowing for bequests to future generations. The model is set up to be consistent with both aggregate and disaggregated balance sheet positions as revealed in the British Household Panel Survey. The paper goes on to outline the effect on debt and balance sheets of changes in interest rates, house prices, preferences and retirement income.

Keywords: OLG models, household debt, households' portfolios, debt to income ratio

JEL Classification: D14, D31, D91

Suggested Citation

Tudela, Merxe and Young, Garry, The Determinants of Household Debt and Balance Sheets in the United Kingdom (July 2005). Bank of England Working Paper Series No. 266, Available at SSRN: https://ssrn.com/abstract=824227 or http://dx.doi.org/10.2139/ssrn.824227

Merxe Tudela (Contact Author)

Bank of England - Market Infrastructure Division ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom
+44 (0)207 601 3840 (Phone)

HOME PAGE: www.bankofengland.co.uk

Garry Young

ESCOE ( email )

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