Template-Type: ReDIF-Paper 1.0
Author-Name: Joao Ricardo Faria
Author-Name: Le Wang
Author-Name: Zhongmin Wu
Title: Debts on debts
Abstract: This paper studies the impact of mortgages on consumer debt and on debt on durable goods.
We first present a stylized model in which an outstanding debt, representing mortgages, affects
positively consumer debt, and debt on durable goods. The model is empirically tested for the
U.S. using PSID 2005 wave. Our results are striking. First, we find strong evidence supporting a
positive association between mortgage loans and consumer debts, regardless of the measures used,
the control variables used, and the methods used. Second, we find that the effects of mortgages on
the debt on durable goods are in general smaller than the effects of mortgages on consumer debt.
Third, our distributional analysis reveals that the effects monotonically decrease as the quantile
increases. Finally, our results are also confirmed by the results using the U.K. data.
File-URL: http://www.ntu.ac.uk/__data/assets/pdf_file/0011/310250/debts-on-debts.pdf
File-Format: Application/pdf
File-Function: First version, 2009
Creation-Date: 2009-12
Classification-JEL: G21, E44, R21, R31
Keywords: Consumer expenditure, housing, credit, censored regressions
Handle: RePEc:nbs:wpaper:2009/7