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Household debt and consumer spending in Korea : Evidence from household data

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Title Household debt and consumer spending in Korea
Similar Titles
Sub Title

Evidence from household data

Material Type Articles
Author(English)

Kim, Youngil; Hwang, Min

Publisher

Sejong, South Korea : Korea Development Institute

Date 2016
Journal Title; Vol./Issue KDI Journal of Economic Policy:vol. 38(no. 4)
Pages 22
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Conditions
Economy < Economic Administration
Holding Korea Development Institute
License

Abstract

Household debt in Korea raises concerns about the resilience of the economy due to its size and quality. Against this backdrop, we investigate if household leverage matters for private consumption in adverse economic environments even without severe financial disruptions. We find that the balance sheet positions in terms of the leverage ratio may weaken consumption growth. We also find that the depressive effect of debt on consumption may differ across types of consumer spending and household characteristics. In particular, the effects of indebtedness have been much stronger in relation to durable goods expenditures than in other areas. In addition, debtors in highincome (wealth) groups have also shown downward adjustments in consumption even more so than low-income (wealth) groups. These findings imply that debtors’ precautionary behavior may serve as an important channel from leverage to consumer spending.