Munich Personal RePEc Archive

Households’ Debt Thresholds: A Market Aspects Approach

Lemus, Antonio and Pulgar, Carlos (2021): Households’ Debt Thresholds: A Market Aspects Approach.

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Abstract

Global trends show high levels of households’ indebtedness, not seen before, in developed and emerging economies that could affect countries’ financial stability. This paper develops an approach based on market aspects to estimate households’ debt thresholds, applicable to any economy where household financial survey and interest rate ceilings exist. We use statistical information from the 2017 Chile’s household financial survey. The results state that: The same debt threshold should not be used for all households as variables such as income affect it. Both short-term and long-term debt thresholds increase with households’ income level. The presence of mortgage debt increases debt thresholds.

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