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Household debt and country economic growth: does a magic threshold exist?

Household debt and country economic growth: does a magic threshold exist?
Household debt and country economic growth: does a magic threshold exist?

Average household debt has now surpassed the level of 2008, which signals an increase in systemic risk and thereby the fragility of the financial system. This paper investigates the effect of household debt on 24 countries’ economic growth. In addition, we also examine whether a tipping point of debt exists. By employing the threshold method, we found that the impact of household debt on a country’s economic growth is negative. Because the relationship between debt and growth is a monotonically non-increasing function, we do not find a magic threshold of debt.

Crisis, Developed and developing countries, Economic growth, Household debt, Threshold, Tipping-point
1511-6670
161-174
Daud, Siti Nurazira Mohd
a384d372-eb1e-4d47-8690-3870f0e16afb
Podivinsky, Jan M.
68b5a6e8-9d09-4a3e-97b2-4a9e4f1efbb9
Abd Samad, Khairunnisa
a046809b-b52f-4c51-ac25-a788a4005661
Daud, Siti Nurazira Mohd
a384d372-eb1e-4d47-8690-3870f0e16afb
Podivinsky, Jan M.
68b5a6e8-9d09-4a3e-97b2-4a9e4f1efbb9
Abd Samad, Khairunnisa
a046809b-b52f-4c51-ac25-a788a4005661

Daud, Siti Nurazira Mohd, Podivinsky, Jan M. and Abd Samad, Khairunnisa (2021) Household debt and country economic growth: does a magic threshold exist? International Journal of Business and Society, 22 (1), 161-174. (doi:10.33736/ijbs.3168.2021).

Record type: Article

Abstract

Average household debt has now surpassed the level of 2008, which signals an increase in systemic risk and thereby the fragility of the financial system. This paper investigates the effect of household debt on 24 countries’ economic growth. In addition, we also examine whether a tipping point of debt exists. By employing the threshold method, we found that the impact of household debt on a country’s economic growth is negative. Because the relationship between debt and growth is a monotonically non-increasing function, we do not find a magic threshold of debt.

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Accepted/In Press date: 29 July 2020
Published date: 24 March 2021
Additional Information: Publisher Copyright: © 2021, Universiti Malaysia Sarawak. All rights reserved. Copyright: Copyright 2021 Elsevier B.V., All rights reserved.
Keywords: Crisis, Developed and developing countries, Economic growth, Household debt, Threshold, Tipping-point

Identifiers

Local EPrints ID: 449817
URI: http://eprints.soton.ac.uk/id/eprint/449817
DOI: doi:10.33736/ijbs.3168.2021
ISSN: 1511-6670
PURE UUID: 4242cf5c-c373-46d6-b8cf-868389106779
ORCID for Jan M. Podivinsky: ORCID iD orcid.org/0000-0002-4921-1189

Catalogue record

Date deposited: 18 Jun 2021 16:30
Last modified: 17 Mar 2024 02:32

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Contributors

Author: Siti Nurazira Mohd Daud
Author: Jan M. Podivinsky ORCID iD
Author: Khairunnisa Abd Samad

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