Namibian Household’s Indebtedness and the Impact on Overall Financial Stability
Objectives: Financial soundness of the household sector matters for the overall financial stability of the country. This is true that, financial stability of the household sector does not only affect the financial system but the real economy as well through household consumption and investments. The aim of this paper is to present and analyze the main measures of indebtedness.
Methods/ Statistical Analysis: The effect of different factors such as house- holds income, mortgages, and financial prudence fueling the household debts has been discussed. Granger causality test was used to find the relationship between household debts and GDP. Different ratio tests such as debt to income ratio (DIR), debt to service ratio (DSR), debt to asset ratio and household debt to real GDP were employed in the data analysis.
Findings: Debt to income ratio shows the percentage of income goes toward re- paying someone’s debt. It was found out that there is a positive relationship between household debts and GDP; if household debts increase the GDP also increases. It was also found out that household with high income tend to have high debts and vice versa.
Application: This study is helpful because it will show the importance of evaluating household debts and its impact on economic growth. The result of this study will help the policy makers to formulate strategies that are helpful in attaining sustainable financial stability. It will also help people understand the importance of managing household debts so that housing prices would not be inflated for the next generation.
- M. Fuenzalida, J. Ruiz-tagle. Household’s financial vulnerability. Banco Central de Chile Documents de Trabajo Central Bank of Chile Working. 2009.
- N. Girouard, M. Kennedy, C. Andr`e. Has the Rise in Debt Made Households More Vulnerable? Housing Finance International. 2006; 22(1), 21-40.
- Namfisa and Bank of Namibia. Financial Stability Report. Namibia Financial Stability Report. 2016.
- Y. Kim, H.C. Kim, H.Y. Yoo. Household over-indebtedness and financial vulnerability in korea: evidence from credit bureau data. KDI Journal of Economic Policy. 2016; 38(2), 53-76.
- E. Sweeney-Bindels. Housing Policy and Delivery in Namibia. Institute for Public Policy Research, Windhoek, Namibia. 2011.
- R.A. Turk. Housing price and household debt interactions in Sweden. IMF Working Paper. 2015; 1-44.
- S.J. Walters. What is a cox model? What Is...? Series. 2009; 1-8.
- 8International Monetary Fund. 2016 article IV consultation press release; staff report; and statement by the executive director for Namibia. IMF Country Report, No. 16/373(16). 2016.
- Global Financial Stability Report October 2017 section Two: Household Debt and Financial Stability. International Monetary Fund. 2017; 53-84.
- Namfisa and Bank of Namibia. Financial Stability Report. Namibia Financial Stability Report. 2015.
- N. Mwilima, H. Fillipus, F. Fleermuys. Evaluating the Namibian housing market: opportunities and constraints. 13th Annual Symposium Housing in Namibia Bank of Namibia. 2011; 14-32.
- M. Shukri, A. Rani, S. Hanifah, B. Nordin, C.C. Lau. Rich debt, poor debt: assessing household indebtedness and debt repayment capacity 1. Bank Negara Malaysia. 2016; 91, 153-168.
- G. D’Alessio, S. Lezzi. Household over-indebtedness definition and measurement with Italian Data. Bank of Italy Occasional Paper. 2012; 1-22.
- S. Fischer. Housing and financial stability. Bank of International Settlements. 2017.
- E. Sierminska. Indebtedness of households and the cost of debt by household type and income group. Social Situation Monitor. 2014; 1-24.
- K.E. Dynan, D.L. Kohn. The rise in US household indebtedness: causes and consequences. Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. 2007.
- M. Persson. Household indebtedness in Sweden and implications for financial stability: The use of household-level data. Bank of International Settlements. 2007; (46), 124-135.
- B. Gadanecz, K. Jayaram. Measures of financial stability. Bank for International Settlements. 2009; 31, 365-380.
- J. Kask. Household debt and financial stability. Kroon and Economy. 2003; 35-42.
- J.D. Frechette. Household Indebtedness and Financial Vulnerability. Ottawa, Canada. 2016; 1-28.
- S. Angel, K. Heitzmann. Over-indebtedness in Europe: The relevance of country- level variables for the over-indebtedness of private households. Journal of European Social Policy. 2015; 25(3), 331-351.
- A. Filardo. Household debt, monetary policy and financial stability: Still searching for a unifying model. Bank for International Settlements. 2016; 46, 31-50.
- B. Insel. The impact of household debt on the economy. Master’s Thesis, Department of Economics, University of Kent. 2017.
- B. Bierut, T. Chmielewski, A. Glogowski. Implementing loan-to-value and debt- to-income ratios: learning from country experiences. The case of Poland. Narodowy Bank Polski Working Paper No. 212. 2015.
- B.J. Keys, D.G. Pope, J.C. Pope. Failure to refinance. Journal of Financial Economics. 2016; 122(3), 482-499.
- L. Anderloni, E. Bacchiocchi, D. Vandone. Research in economics household financial vulnerability: An empirical analysis. Research in Economics. 2012; 66(3), 284-296.
- A. Lusardi, P. Tufano. Bebt Literacy, financial experiences, and over in debt- edness. National Bureau of Economic Research. 2009; 1-46.
- J.J. Kilborn. Behavioral economics, over-indebtedness and amp; comparative con- sumer bankruptcy: searching for causes and evaluating solutions. SSRN Electronic Journal. 2005.
- B. Bucks, K. Pence. Do borrowers know their mortgage terms? Journal of Urban Economics. 2008; 64(2), 218-233.
- K.M. Pence, B. Bucks, K. Pence. Do Borrowers Know Their Mortgage Terms? Do borrowers know their mortgage terms? 2008; 64(2), 218-233.
- M. Lombardi, M. Mohanty, I, Shim. The real effects of household debt in the short and long run. Bank of International Settlement Working Papers. 2017; 42.
- G. Debelle. Macroeconomic implications of rising household debt. Bank of International Settlements Working Paper No 153. 2004.
- P. Cox, J. Whitley, P. Brierley. Financial pressures in the UK household sector: evidence from the British household panel survey. Bank of England Quarterly Bulletin, winter. 2002; 200, 410-419.
- P. Cox, J. Ruiz-tagle. The distribution of assets, debt and income among Chilean households. Banco Central de Chile Documentos de Trabajo Central Bank of Chile Working Papers. 2006.
- S. Ulaah. Cointegration and causality between exports and economic growth in Pakistan. European Journal of Social Sciences. 2009; 10(2), 264-272.
Abstract Views: 5
PDF Views: 2