Household debt and the macroeconomy

Abstract

This thesis presents four essays that study the determinants of private household debt and the relation between private indebtedness and macroeconomic activity. Chapter 1 shows that inequality and household debt are cointegrated of order one and therefore share a common trending relation. In Chapter 2, I demonstrate that interpersonal comparison is an important driver of short-run credit movements. Chapter 3 points out that the effects of fiscal consolidations crucially depend on the level of private indebtedness. In Chapter 4, I present a model with financial frictions that is able to replicate the empirical responses of household debt and other main macro aggregates to technology shocks and income tax cuts.