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<div class="col-sm-9"><h4>Abstract</h4><p>The past decades have witnessed a strong increase in householddebt and fast growth of private consumption expenditures in manycountries. This paper empirically investigates four explanations:First, the expenditure cascades hypothesis argues that an increasein inequality induced lower income groups to copy the spendingbehaviour of richer peer groups and thereby drove them into debt(‘keeping up with the Joneses’). Second, the housing boom hypothesisargues that increasing property prices encourage householdspending and household borrowing due to wealth effects, easedcredit constraints, the prospects of future capital gains and changesin mental accounts. Third, the low interest hypothesis arguesthat low interest rates encouraged households to take on moredebt. Fourth, the credit market deregulation hypothesis arguesthat deregulation boosted credit supply. The paper tests thesehypotheses by estimating the determinants of household borrowingusing a panel of 13 OECD countries (1980–2011). Results indicatethat real estate prices were the most important drivers of householddebt which we interpret as the result of speculative dynamics inreal estate markets. In contrast we do not find a significant impactof shifts in the income distribution on household sector indebtedness.Our results are consistent with the credit deregulation andlow interest rate hypotheses, but their explanatory power for the1995–2007 period is low.</p><div><strong>DOI:</strong>10.1561/105.83</div></div>

Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries