Household Debt and Economic Growth in Europe
We investigate the role and impact of household debt on regional economic activity in Europe following the Great Recession that started in 2008. We use a loan-level data set of millions of residential mortgages originated between 2000 and 2013 to calculate regional measures of household debt and property prices. We exploit information on the loan-level mortgage interest rate to build a measure of mortgage credit mispricing during the housing boom and identify the effect of a credit shock on household debt. Our findings indicate that an aggregate credit supply shock in Europe boosted household leverage and house prices for borrowers at all income levels but in relatively larger size for low-income groups. In addition, we find that regions in which household leverage increased more rapidly during the 2004-06 period experienced a more severe decline in output and employment after 2009.
BARBAGLIA Luca;
MANZAN Sebastiano;
TOSETTI Elisa;
2025-01-09
CAMBRIDGE UNIV PRESS
JRC120988
1469-8056 (online),
https://doi.org/10.1017/S1365100524000117,
https://publications.jrc.ec.europa.eu/repository/handle/JRC120988,
10.1017/S1365100524000117 (online),
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