Debt and credit markets played a crucial role in recent economic history. This thesis is composed of three chapters, each of which explores some drivers of private and public debt accumulation throughout the past decade. The first two chapters are directly linked, and study some behavioural determinants of household debt accumulation in the United States in the run-up to the 2007-2008 financial crisis. The third chapter takes a different perspective, and focuses on the political economy of fiscal reforms. In the first chapter, I study whether the growth in US household debt ahead of the 2007-2008 financial crisis can be attributed to shifts in the distribution of personal income across the US population. The underlying theoretical mechanism is based on the idea that if individuals are concerned with status, rising income inequality within a given social group might lead its relatively poorer members to consume a larger proportion of their resources, due to a desire to emulate the consumption levels of richer individuals (Duesenberry [1949]; Frank, Levine and Dijk [2014]; Bertrand and Morse [2016]). I test this hypothesis by exploiting state-level variation in top incomes over time, following the methodology proposed by Bertrand and Morse [2016]. The results I present in this chapter challenge the status-emulation theory of consumer behaviour during the 2000s credit boom. I show that, between 1996 and 2007, only low and-middle-income home-owners increased their expenditure and debt-to-income ratios as a response to an increase in income inequality in their state of residence. I also show that the growth in income inequality was strongly correlated with house prices growth, across US states and metropolitan areas. The positive correlation between inequality and household debt in the pre-crisis US might therefore be simply explained by the wealth and collateral effects experienced by low and middle-income home-owners living in areas where inequality was growing at the fastest rates. The lifting of credit constraints due to rising house prices have been a major driver of household debt accumulation ahead of the 2007-2008 financial crisis (Mian and Sufi [2011]). However, this effect might have been coupled with a generalized optimistic belief that the growth in house prices was likely to continue in the future (Case, Shiller and Thompson [2012]). The second chapter therefore tests whether consumers hold realistic expectations about the housing market, and whether this is a driver of their consumption and saving decisions. Using the Michigan Survey of Consumers, I show that American households have heterogeneous expectations about the future of house prices, which systematically depend upon household characteristics, as well as upon the history of past house price realizations in the local area of residence. I also analyze individual-level forecast errors to show that house price expectations are biased and inefficient. Changes in individual forecast errors are predictable from past house price realizations in the local area of residence: in particular, forecast errors are positively correlated with recent price trends, and tend to become overoptimistic in good times, and over-pessimistic in bad ones. The predictability of forecast errors from public information available at the time the forecast was made suggests a violation of full-information rational expectations theory. This systematic bias in house price expectations matters because consumers make financial decisions on the basis of their house price beliefs. By exploiting an exogenous shift in housing sentiment, I show that when individuals expect the value of their properties to rise, they borrow against the anticipated increase in home equity. The third and final chapter shifts the focus to the political drivers of public debt and deficits. Public debt crises often call for the intervention of international financial institutions, such as the International Monetary Fund (IMF). In this chapter, I introduce a new panel dataset on planned fiscal policy prescriptions included in all IMF loans between 2002 and 2012, and use it to study how domestic politics of recipient countries influence the content of IMF lending agreements. I show that IMF policy prescriptions depend strongly on domestic politics and that fiscal conditions are shaped by a political force often neglected in public choice literature: the threat of extra-parliamentary opposition, or civil unrest. Extra-parliamentary opposition (measured as a populations’ propensity to riot and demonstrate) significantly reduces the stringency of fiscal policy conditions attached to IMF loans. It also reduces the number of reforms in the realms of public employment and labor markets. These results suggest that fiscal policy has a strong political component even during circumstances when domestic politics are commonly assumed to cease to matter, as they do in IMF agreements. Also, they suggest that voting is not the only mechanism through which politics enters the technical realm of economic policy.

This paper verifies the positive relationship between consumer credit and the four categories of consumption spending in South Africa. The study utilised data sourced from the South African Reserve Bank for the period 1975-2011. The study was conducted via regression analysis to determine the relationship between the dependent and independent variables. A significant positive relationship was found between the independent variable household debt and the four categories of consumption. The results are statistically significant for non-durable and durable goods and although significant for services and semi-durable goods, the relationship is less strong in these two instances. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

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Ever since the big recession of the world economy 2007, the central banks in Europe have struggled to regain financial stability. Their goals have been hard to reach and 2014 The European Central bank (ECB) introduced negative interest rates for the first time in the world history. However, today, year 2016, many countries still have not been able to reach their inflation target. During this time with expansive monetary policies, many European Union (EU) members have faced rising level of household debts to GDP. This study focus on EU-members and uses a Vector Autoregressive method, Granger causality test and an impulse-response test to give a greater understanding about the association between the level of household debt and interest rate. Further, it aims to investigate if the negative interest rate has an impact on that association. However, our empirical results show that there is a significant negative association between the level of household debt and the interest rate in Austria, Belgium, Bulgaria, Finland, Germany, Italy, Poland, Romania, Slovakia, Spain and Sweden. Further, they show that there is a granger causality from the interest rate to the level of household debt for Belgium, Finland, Germany, Poland, Slovakia and Sweden. For all these countries, our findings show that a shock in the interest rate have a short-term effect on the level of household debt. Lastly, we found no statistical significant evidence for that the negative association between the interest rate and the level of household debt does increase when the interest rate is negative.

The present thesis is a study of the economic consequences of declining real wages in the United States. It proposes that, when the real wages of the majority of the U.S. workforce declined in the 1970s, 1980s and the first half of the 1990s, household labour supply increased. Consequently, real family income in the bottom eighty percent of the income distribution rose. Wage-earning households were not only struggling to maintain their acquired standard of living as real wages were declining, but they were also, perhaps more importantly, trying to raise their standard of living. It was precisely when household labour supply hit a ceiling in the second half of the 1990s, that household debt exploded. Surging household debt from the late 1990s until 2007 – driven primarily by home mortgage debt – suggests that the culturally powerful “American Dream” motivated wage-earning households to seek and expect a continuously rising standard of living via home ownership even in the face of topped out work hours and historically low real wages.

The present thesis is a study of the economic consequences of declining real wages in the United States. It proposes that, when the real wages of the majority of the U.S. workforce declined in the 1970s, 1980s and the first half of the 1990s, household labour supply increased. Consequently, real family income in the bottom eighty percent of the income distribution rose. Wage-earning households were not only struggling to maintain their acquired standard of living as real wages were declining, but they were also, perhaps more importantly, trying to raise their standard of living. It was precisely when household labour supply hit a ceiling in the second half of the 1990s, that household debt exploded. Surging household debt from the late 1990s until 2007 – driven primarily by home mortgage debt – suggests that the culturally powerful “American Dream” motivated wage-earning households to seek and expect a continuously rising standard of living via home ownership even in the face of topped out work hours and historically low real wages.

Constantly increasing household debt is becoming frequently discussed topic. The main aim of this thesis is to analyse the development and structure of household debt in the Czech Republic and its comparison with household debt in Austria and with households in other EU countries and Eurozone, respectively. The analysis of sources and laws connected with this issue and especially analysis of regularly reported data of noted countries serve to achieve the aim of the thesis. The first part of the thesis is focusing on definition of terms related to this issue such as credit, loan, mortgage loan, regular and bridge loan, consumer credit, leasing and APR. The second part deals with analysis of debts in the Czech Republic and Austria. First, the size of total debt is examined and then the attention is paid to development and structure of debt from different points of view (creditors, purpose, currency and maturity). The last part discusses the position of the Czech Republic and Austria from the point of view of other households within the EU countries and Eurozone, respectively.

The Swedish households’ debt relative to income has increased for some time now, with the Riksbanks’ executive board expressing its concern for the risk it brings. It has been debated whether or not to take the high indebtedness into account when setting the policy rate. There is at the same time no consensus about the relationship between the repo rate and household debt. This study aims to examine the effect of a change in the repo rate on household debt-to-income ratio, using a VAR-model. The result is that a 1 percentage point shock to the repo rate for one quarter will have a negative impact on the household debt-to-income ratio by 1.75 percentage points after about 8 quarters. However this may not decrease the risk associated with the debt due to higher unemployment.

<p>Diss. Stockholm :  Stockholm School of Economics, 2013. Introduction together with 4 papers.</p>

The goal of the diploma thesis is to describe the impact of the financial crisis on financial position of czech households and to compare it with households from EU.