The Determinants of Household Debt and Balance Sheets in the United Kingdom
33 Pages Posted: 19 Oct 2005
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: Suggested Citation
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