DP15368 Exploring Differences in Household Debt Across the United States and Euro Area Countries

Author(s): Dimitris Christelis, Michael Ehrmann, Dimitris Georgarakos
Publication Date: October 2020
Keyword(s): counterfactual decompositions, debt burden, Household Debt, household finance
JEL(s): D12, E21, G11
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15368

Household debt in the United States has played a central role in the up-run and the aftermath of the global financial crisis. Despite this, our understanding of household debt and potential debt overhang is still limited. To shed light on this issue, we put U.S. household leverage in an international perspective, using household-level data for the United States and ten euro area economies. U.S. households have the highest prevalence of collateralized and non-collateralized debt, hold comparatively large amounts of loans, and face a higher debt-service burden, even though they have higher income and financial wealth. These differences are mainly related to the U.S. economic environment, which appears to be more conducive to both types of debt, primarily because a given level of collateral is associated with higher prevalence of collateralized debt, and larger amounts of it, in the United States.