How did household indebtedness hamper consumption during the recession? Evidence from micro data

The paper investigates the impact of household debt on consumption over a business cycle. * A quarterly panel dataset that covers over 100,000 individuals in 2005-2011 is used. * A negative relationship between the debt-to-income ratio and consumption is quite stable over the period. * A negative impact of the debt service ratio on consumption is stronger during the recession than in other periods. * The debt service ratio identifies the channel by which indebtedness amplified the 2008-2009 recession. The paper investigates the extent to which household indebtedness suppressed consumption duri... Mehr ...