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The effects of cost of living and household dependency on household debt and its composition in Malaysia

Hafizah, Hammad Ahmad Khan (2017) The effects of cost of living and household dependency on household debt and its composition in Malaysia. PhD. thesis, Universiti Utara Malaysia.

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Abstract

The past decade has witnessed a notable increase in household debt across countries, which raises concerns on its impact on social and economic aspects. Although household debt plays an important role in supporting the economy to grow, a continuous rise in the debt level may bring serious economic consequences. Hence, understanding the potential factors that contribute towards the significant rise in the debt level is useful for policy implications. The main objective of this study was to investigate the effects of the cost of living and household dependency on household debt and its composition in Malaysia where the roles of income level, interest rates and housing prices are the control variables. By using the Autoregressive Distributed Lag (ARDL) modelling approach, this study revealed that in the long run, income level, housing prices and old age dependency have positive influences on both total household debt and mortgage debt while an inverse relationship was observed on the effects of interest rates, cost of living and young age dependency on both types of debt. This finding is also similar to the case of consumer debt except for the role of housing prices which exhibit a negative relationship. This study also discovered that in the event of any short-term deviation in the household debt model the mortgage debt will adjust faster compared to the consumer debt, which may be due to risks associated with mortgage debt which is typically lower since it is secured with assets and thereby any short-term deviation will be easily adjusted. Finally, the inclusion of the structural break in the debt model revealed that the break effects are significant in all the models and thereby support the importance of considering their presence in the analysis to prevent biased estimation.

Item Type: Thesis (PhD.)
Uncontrolled Keywords: household debt, mortgage debt, consumer debt, ARDL, structural breaks
Subjects: H Social Sciences > HG Finance
Divisions: School of Economics, Finance & Banking
Depositing User: Mr. Badrulsaman Hamid
Date Deposited: 28 May 2019 00:55
Last Modified: 28 May 2019 00:55
URI: http://etd.uum.edu.my/id/eprint/7196

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