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In search of a smoking gun: The repo rate’s effect on household debt-to-income ratio
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2014 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The Swedish households’ debt relative to income has increased for some time now, with the Riksbanks’ executive board expressing its concern for the risk it brings. It has been debated whether or not to take the high indebtedness into account when setting the policy rate. There is at the same time no consensus about the relationship between the repo rate and household debt. This study aims to examine the effect of a change in the repo rate on household debt-to-income ratio, using a VAR-model. The result is that a 1 percentage point shock to the repo rate for one quarter will have a negative impact on the household debt-to-income ratio by 1.75 percentage points after about 8 quarters. However this may not decrease the risk associated with the debt due to higher unemployment. 

Place, publisher, year, edition, pages
Keyword [en]
Macroeconometrics, Vector autoregression, Household debt, Debt-to-income ratio, Monetary policy
National Category
URN: urn:nbn:se:uu:diva-217562OAI: diva2:693245
Subject / course
Available from: 2014-03-13 Created: 2014-02-04 Last updated: 2014-03-13Bibliographically approved

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