Open AccessHousehold Debt and Country Economic Growth: Does a Magic Threshold Exist?
Author(s) -
Siti Nurazira Mohd Daud,
Jan M. Podivinsky,
Khairunnisa Abd Samad
Publication year - 2021
Publication title -
international journal of business and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.236
H-Index - 15
ISSN - 1511-6670
DOI - 10.33736/ijbs.3168.2021
Subject(s) - debt , household debt , economics , debt to gdp ratio , debt levels and flows , monetary economics , internal debt , external debt , financial fragility , macroeconomics , financial crisis
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.