The Role of Various Factors in Accumulation of Household Debt on OECD Countries
DOI:
https://doi.org/10.61506/01.00513Keywords:
household debt, the Organization for Economic Cooperation and Development (OECD), panel data analysis, fixed effects, random effects, and panel-corrected standard errorsAbstract
The rapid increase in household debt since the 1980s has significantly transformed economic environments and raised substantial concerns regarding financial stability, particularly in the aftermath of the 2008 global financial crisis. This research seeks to explore the underlying factors contributing to household debt accumulation across 30 OECD nations, examining the impacts of both demand and supply-side elements. The analysis utilizes a baseline regression model to assess the determinants of household debt, employing fixed effect (FE), random effect (RE), and panel corrected standard error (PCSE) estimators to ensure robustness over the period from 1995 to 2022. The findings of this study provide novel insights into the drivers of household debt. Additionally, the results indicate that income, interest rates, financial development, unemployment, housing prices, welfare expenditures, and the working population all exert positive and significant influences on household debt, while inflation is found to have a negative impact. Consequently, the study advises policymakers to exercise caution and take proactive measures to prevent household indebtedness from escalating to unsustainable levels, thereby fostering sound countercyclical policies and ensuring adequate regulation of the housing market.
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