Household debt persistence and its drivers: Evidence from cross-country growth heterogeneity

Authors

DOI:

https://doi.org/10.18559/ebr.2026.3.2674

Keywords:

household debt, consumer confidence, bank lending policy, COVID-19, life expectancy, labour force

Abstract

Household indebtedness has been a major policy concern since the 2008 financial crisis. In the current context, understanding the drivers of household debt is a more pressing issue than ever, as they affect economic stability and resilience. The aim of the paper is to examine the determinants of household debt using a comprehensive dataset spanning 36 countries and the period from 2012 to 2022. We employ dynamic panel regression models to explore the drivers of household indebtedness. Our results indicate that the Consumer Confidence Index positively influences household debt across all samples, while the COVID-19 pandemic reduced debt levels. Similarly, bank policies that tighten lending standards reduce household debt, whereas greater credit availability encourages borrowing. On the other hand, a larger working-age population appears to reduce consumer indebtedness, while life expectancy contributes to its growth. This highlights the complex role of consumption-oriented explanations in shaping borrowing behaviour.

JEL Classification

Price Level • Inflation • Deflation (E31)
Banks • Depository Institutions • Micro Finance Institutions • Mortgages (G21)
Household Saving, Borrowing, Debt, and Wealth (G51)

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2026-09-11

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Vol. 12 No. 3 (2026): in-press

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Copyright (c) 2026 Agata Wierzbowska, Renata Karkowska, Zbigniew Korzeb, Paweł Niedziółka

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Wierzbowska, A., Karkowska, R., Korzeb, Z., & Niedziółka, P. (2026). Household debt persistence and its drivers: Evidence from cross-country growth heterogeneity. Economics and Business Review, 12(3). https://doi.org/10.18559/ebr.2026.3.2674

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