Sustainable household debt: Towards an operational view and framework
- Kjersti-Gro Lindquist
- Staff Memo
From a broad financial stability perspective, sustainable household debt should be evaluated within a steady-state consumption-path approach. We calculate measures for households' steady-state consumption based on average consumption to income ratios for a number of household groups and use a 'counterfactual history approach' to evaluate their debt sustainability. The results show that households within the first-home buyers and second steppers groups, which hold more than half of total household debt in Norway, are vulnerable to an increase in the loan rate.
Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.
ISSN 1504-2596 (online)