An Empirical Analysis of the Determinants of Household Debt in Korea

Abstract

South Korea's household debt is an important subject of research because it is constantly increasing in size and relatively large compared to other countries. In this study, the determinants of household debt are analyzed from the perspective of economic environment and policy factors. To this end, regression analysis was performed household debt and explanatory variable time series data from Q4 2007 to Q3 2022. The main results obtained from the empirical analysis are as follows. First, economic growth supports households' ability to afford debt. Second, the housing asset price factor contributed to the increase in household debt. Third, mortgage lending decreases when loan interest rates rise, but the effect of interest rate on aggregate credit is somewhat unclear. Fourth, the suppression and relaxation of housing lending through regulation has a significant impact on the size of mortgage lending. The results of this analysis suggest the following policy implications. First of all, in order to manage household debt, it is necessary to stabilize housing prices through housing loan policies. In addition, stable real economic management is required to support households' ability to afford debt. And managing household debt requires appropriate monetary policy and the operation of housing loan regulations.