Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66941
Authors: 
Meh, Césaire A.
Terajima, Yaz
Chen, David Xiao
Carter, Tom
Year of Publication: 
2009
Series/Report no.: 
Bank of Canada Discussion Paper 2009-7
Abstract: 
The authors use microdata from the 1999 and 2005 Surveys of Financial Security to identify changes in household debt, and discuss their potential implications for monetary policy and financial stability. They document an increase in the debt-income ratio, which rose from 0.75 to 0.95, on average. Rising debt ratios were driven by a 50 per cent increase in mortgage balances among the middle-aged, a doubling of credit card debt among households over 55, and a fourfold increase in home equity lines of credit among small business owners and households without high school diplomas. The authors identify rising debt-income ratios among households in the bottom income quintile as the most important development of the years 1999 through 2005, signalling greater sensitivity to rising interest rates or negative income shocks particularly among income-poor homeowners, whose 2005 mortgage obligations totalled 72 per cent of income. Meanwhile, an increase in the portfolio share for which real estate accounts, particularly among the middleaged, suggests that household balance sheets have become more sensitive to changes in the housing market. In addition to poor households, the authors identify former bankrupts, younger households, and the self-employed as more indebted and hence at greater risk.
Subjects: 
Credit and credit aggregates
Sectoral balance sheet
Productivity
Financial stability
JEL: 
E21
E24
Document Type: 
Working Paper
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