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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/64836
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| Title: | | The effect of household debt on aggregate demand: The case of Spain  |
| Authors: | | Jauch, Sebastian Watzka, Sebastian |
| Issue Date: | | 2012 |
| Series/Report no.: | | CESifo Working Paper: Monetary Policy and International Finance 3924 |
| Abstract: | | Households in some European countries increased their indebtedness massively over the past 20 years. Besides household debt, also government debt and corporate debt are in some countries at levels not seen before. While there is a common agreement that these high debt levels are not sustainable there is fewer consensus about the effect of changes in debt and especially debt levels on aggregate demand. Based on a cross country study of 18 European countries we show that there is a strong link between household sector debt and aggregate demand. We strengthen these results by an analysis for Spanish provinces. The level of household debt in the Spanish provinces is highly significant for changes in aggregate demand that translated into increasing unemployment in these regions during the recession following the financial crisis of 2007/08. |
| Subjects: | | debt leverage balance sheet recession household sector aggregate demand unemployment |
| JEL: | | E21 J20 O52 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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