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.
""Fisher Dynamics" in US Household Debt, 1929-2011." American Economic Journal: Macroeconomics,
Household Saving; Personal Finance
Macroeconomics: Consumption; Saving; Wealth
Price Level; Inflation; Deflation
Interest Rates: Determination, Term Structure, and Effects
National Debt; Debt Management; Sovereign Debt
Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: U.S.; Canada: 1913-