THE IMPACT OF DEBT-SERVICING BURDEN ON HOUSEHOLD EXPENDITURE IN NIGERIA: A CASE OF EKITI STATE SENATORIAL DISTRICTS
Keywords:household, debt, expenditure pattern, logistic regression, SPSS
This study employs binary logistic regression technique to explore the impact of household debt-servicing burden on expenditure patterns in South-West geo-political region of Nigeria, using Ekiti State as a case study. Questionnaires were randomly distributed to 2500 households, and the results unveil that households with high income, large family-size and heads within the age group (40 and above) were more susceptible to debtburden. In addition, the paper highlighted that indebtedness compromises the quality of nutrition and health status of household members. Based on the above findings, we conclude that high indebtedness and debt burden trajectories cause deleterious effects on household consumption patterns and overall economic well-being. Thus, household heads should inculcate fiscal discipline which promotes saving culture and averts future shocks that could emanate from precautionary demands. Second, debt providers should regulate loans in cognizance to household repayment capacity and other stipulated policies which break the vicious cycle arising from over-indebtedness, install stability and spur economic development.
Alpanda, S. & Zubairy, S. (2018). Household debt overhang and transmission of monetary policy. Journal of Money, Credit and Banking, 00(0), 1-43.
Ando, A. & Modigliani, F. (1963). The life cycle hypothesis of saving: Aggregate implications and tests. The American Economic Review, 53(1), 55–84.
Berger, L.M. & Houle, J.N. (2019). Rising household debt and children’s socio-emotional well-being trajectories. Demography. doi: 10.1007/s13524-019-00800-7
Bonett, D.G. & Wright, T.A (2014). Cronbach’s alpha reliability: Interval estimation, hypothesis testing, and sample size planning. Journal of Organizational Behavior. doi: 10.1002/job.1960
Borio, C., Kharroubi, E., Upper, C. & Zampolli, F. (2016). Labour reallocation and productivity dynamics: Financial causes, real consequences. BIS Working Paper, No 534.
Checherita, C. & Rother, P. (2010). The impact of high and growing government debt on economic growth: An empirical investigation for the Euro Area. European Central Bank, Working Paper Series, No. 1237
Chucherd, T. (2006). The effect of household debt on consumption in Thailand. Bank of Thailand, Discussion Paper, No. 1.
Curdia, V. & Woodford, M. (2010). Credit spreads and monetary policy. Journal of Money, credit and Banking, 42(6), 3–35.
Daud, S.N. M., Ainulashikin, M., Nursilah, A., and Zurina, K. (2019). Financial Vulnerability and Its Determinants: Survey Evidence from Malaysian Households. Emerging Markets Finance and Trade, 55(1), 1991–2003.
Drehmann, M. & Juselius, M. (2014). Evaluating early warning indicators of banking crises: satisfying policy requirements. International Journal of Forecasting, 30(3), 759‒780.
Dynan, K. (2012). Is a household debt overhang holding back consumption? The Brookings Institution Papers on Economic Activity No. 10, Spring.
Eggertsson, G. & Krugman, P. (2012). Debt, deleveraging and the liquidity trap: A Fisher-Minsky-Koo approach. Quarterly Journal of Economics, 127(3), 1469-1513.
Galway et. al. (2012). A two-stage cluster sampling method using gridded population data, a GIS, and Google earth imagery in a population-based mortality survey in Iraq. International Journal of Health Geographics, 11, 1-9
Giraud, G. & Grasselli, M. (2019). Household debt: The missing link between inequality and secular stagnation. Journal of Economic Behaviour and Organisation. doi:10.1016/j-jebo.2019.03.002
Guerrieri, V. & Lorenzoni, G. (2011). Credit crisis, precautionary savings and the liquidity trap. NBER Working Paper, no. 17583.
Hall, R. (2011). The long slump. American Economic Review, 101(2), 431-469.
James G., Witten D., Hastie T., & Tibshirani R. (2013). An Introduction to statistical learning: with applications in R: Springer.
Jordà, Òscar (2003). Model-Free Impulse Responses, Working Paper, No. 03-8, University of California, Department of Economics, Davis, CA. Retrieved from: https://core.ac.uk/download/pdf/188986594.pdf
Jordà, Ò., Schularick, M. & Taylor, A. (2013). When credit bites back. Journal of Money, Credit and Banking, 45(2), 3–28.
Jordà, Ò., Schularick, M. & Taylor, A. (2015). Betting the house. Journal of International Economics, 96(1), 2–18.
Jordà, Ò., Schularick, M. & Taylor, A. (2016). The great mortgaging: Housing finance, crises and business cycles. Economic Policy, 31(85), 107–152.
Kakar, V., Eric, Daniels, G.E. & Petrovska, O. (2019). Does student loan debt contribute to racial wealth gaps? A decomposition analysis. The Journal of Consumer Affairs. doi: 10.1111/joca.12271
Keese, M. (2012). Who feels constrained by high debt burdens? Subjective vs. objective measures of household debt. Journal of Economic Psychology, 33(1), 125–41.
Kim, J. & Chatterjee, S. (2019). Student loans, health, and life satisfaction of US households: Evidence from a panel study. Journal of Family and Economic Issues, 40, 36–50. doi: 10.1007/s10834-018-9594-3
King, M. (1994). Debt deflation: theory and evidence, Presidential Address, European Economic Review, 38(4), 419‒445.
Krejcie, R. V., & Morgan, D. W. (1970). Determining sample size for research activities. Educational and psychological measurement, 30(3), 607-610. Retrieved from: http://220.127.116.11/referencia/investigacioninstitucional/DOCUMENTO_SampleSizeResearch_KrejcieandMorgan.pdf.
Lee, J.M., Lee, Y.G. & Kim, S. (2019). Loan type and debt delinquency among millennial and non-millennial households. Family and Consumer Sciences Research Journal, 47(4), 342–358. doi: 10.1111/fcsr.12315
Liu, Z., Zhong, X., Zhang, T. & Li, W. (2019). Household debt and happiness: evidence from the China Household Finance Survey. Applied Economics Letters. doi: 10.1080/13504851.2019.1610706
Lombardi, M., Mohanty, M. & Shim, I. (2017). The real effects of household debt in the short and long run. Bank for International Settlements (BIS) Working Papers No. 607.
Maite, B.C. & Santiago, B. (2015). The effects of over-indebtedness on individual health. Institution for the Study of Labour (IZA) Discussion Paper No. 8912.
Maleske, R. T. (1995). Foundations for gathering and interpreting behavior data. Pacific Grove, C. A: Brooks.
Mian, A, Rao, K. & Sufi, A. (2013). Household balance sheets, consumption and the economic slump. Quarterly Journal of Economics, 128(4), 1687–1726.
Mian, A, Sufi, A. & Verner, E. (2015). Household debt and business cycles worldwide. NBER Working Paper, no 21581.
Mian, A. & Sufi, A. (2010). Household leverage and the recession of 2007 to 2009. IMF Economic Review, 58(1), 74–117.
Nakajima, J. (2020). The role of household debt heterogeneity on consumption: Evidence from Japanese household data. Economic Analysis and Policy, 65, 186-197
Peng C., Lee K., & Ingersoll G. (2002). An Introduction to logistic regression analysis and reporting. The Journal of Educational Research, 96, 3-15.
Ramey, V. A., & Zubairy, S. (2018). Government spending multipliers in good times and in bad: evidence from US historical data. Journal of Political Economy, 126(2), 850-901. Retrieved from: https://www.nber.org/papers/w20719
Schularick, M. & Shim, I. (2017). Household Credit in Asia-Pacific. In BIS Papers No. 91 Financial Systems and the Real Economy, 129–44. Bank for International Settlements.
Schularick, M. & Taylor, A. (2012). Credit booms gone bust: monetary policy, leverage cycles and financial crises. American Economic Review, 102(2), 1029–1061.
Scott, R.H. & Pressman, S. (2019). Financially unstable households. Journal of Economic Issues, 53(2), 523-531. doi: 10.1080/00213624.2019.1603765
Sommarat, C., Lamsam, K.S. & Tangsawasdirat, B. (2020). Household debt and delinquency over the life cycle. Asian Development Review, 37(1), 61-92
Velez, E., Cominole, M. & Bentz, A. (2018). Debt burden after college: the effect of student loan debt on graduates’ employment, additional schooling, family formation, and home ownership. Education Economics. doi: 10.1080/09645292.2018.1541167