Household Debt and Consumption: Empirical Analyses and Financial Policy Implications

Shim, Hyein; Ryu, Doojin

doi:2017.46.1.249

Korean J Financ Stud > Volume 46(1); 2017 > Article

Korean Journal of Financial Studies 2017;46(1):249-273.
DOI: https://doi.org/10.26845/KJFS.2017.02.46.1.249 Published online February 28, 2017.

Household Debt and Consumption: Empirical Analyses and Financial Policy Implications

Hyein Shim, Doojin Ryu

가계부채와 국내소비: 실증분석 및 금융정책적 시사점

심혜인, 류두진

Abstract

This study examines the effects of household debt on consumption based on the life cycle-permanent income hypothesis. We conduct the autoregressive distributed-lag (ARDL) bounds test and panel analysis on the Korean regional panel data. We find that household debt has a statistically significant negative effect on consumption. The empirical results suggest that in order to solve household debt problems, the financial authorities should regulate the total debt amount, devise and implement macroprudential regulation, and strengthen monitoring on borrowers` ability to repay their debts.

Key Words: 가계대출정책,가계부채,소비,지역별 패널자료,ARDL 모형,ARDL Model,Consumption,Household Debt Policy,Household Indebtedness,Regional Panel Data