Household debt and consumption during the financial crisis: Evidence from Danish micro data

Arbeitspapier

We use data for nearly 800,000 Danish families to examine whether high household leverage prior to the financial crisis may have amplified the reduction in household spending over the course of the crisis. We find a strong negative correlation between pre-crisis leverage and the change in non-housing consumption during the crisis, conditional on a range of other household characteristics. The larger drop in spending among the highly leveraged families reflects that these families consumed a larger fraction of their income than their less-leveraged peers prior to the crisis. But as the crisis unfolded, this difference in consumption levels between high- and low leverage families vanished. Moreover, we find suggestive evidence that the drop in consumption for the highly leveraged families cannot be fully explained by a contraction in credit supply.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Danmarks Nationalbank Working Papers ; No. 89

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis ; Macroeconomics: Consumption; Saving; Wealth ; Studies of Particular Policy Episodes
• Subject: household debt ; financial crises ; micro data

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Andersen, Asger Lau ; Duus, Charlotte ; Jensen, Thais Lærkholm
• Event: Veröffentlichung
• (who): Danmarks Nationalbank
• (where): Copenhagen
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/106351
• Last update: 10.03.2025, 11:42 AM CET