Does higher household debt increase the sensitivity of consumption to shocks?

Abstract

This paper analyses the impact of the accumulation of household debt in the growth rate of private consumption and the growth rate of unemployment. The study was carried out with a sample of 17 regions of Spain, using the data provided by the databases BD mores, and the Instituto Nacional de Estadística (INE), in the period prior to the crisis of 2008, the period 2003-2007, and a period after to it, which is the period 2007-2010. In our work we have done an econometric study of the data obtained, and analyzed the vulnerability of the autonomous communities. The main result was that higher levels of household indebtedness led to lower rates of growth of private consumption and to larger increases in unemployment.