American Economic Journal: Macroeconomics: Vol. 6 No. 3 (July 2014)

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"Fisher Dynamics" in US Household Debt, 1929-2011

Article Citation

Mason, J. W., and Arjun Jayadev. 2014. ""Fisher Dynamics" in US Household Debt, 1929-2011." American Economic Journal: Macroeconomics, 6(3): 214-34.

DOI: 10.1257/mac.6.3.214

Abstract

The evolution of debt-income ratios over time depends on income growth, inflation, and interest rates, independent of any changes in borrowing. We examine the effect of these "Fisher dynamics" on household debt-income ratios in the United States over the period 1929–2011. Adapting a standard decomposition of public debt to household sector debt, we show that these factors explain, in accounting terms, a large fraction of the changes in household debt-income ratios observed historically. More recently, debt defaults have also been important. Changes in household debt-income ratios over time cannot be straightforwardly interpreted as reflecting shifts in the supply and demand of household credit.

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Authors

Mason, J. W. (Roosevelt U, Chicago)
Jayadev, Arjun (U MA, Boston and Azim Premji U)

JEL Classifications

D14: Household Saving; Personal Finance
E21: Macroeconomics: Consumption; Saving; Wealth
E31: Price Level; Inflation; Deflation
E43: Interest Rates: Determination, Term Structure, and Effects
H63: National Debt; Debt Management; Sovereign Debt
N32: Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: U.S.; Canada: 1913-

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