Kearns, Allan. 'Are Irish households and corporations over-indebted - and does it matter? : The Barrington lecture 2003/2004'. - Dublin: Journal of the Statistical and Social Inquiry Society of Ireland,Vol. XXXIII, 2003/2004, pp148-175
Journal of the Statistical and Social Inquiry Society of Ireland Vol. XXXIII, 2003/2004
Household and corporate indebtedness has soared in recent years and is now at
historically high levels. The market for credit today is unrecognisable compared with just 30
years ago when, in the national economic interest, the rate of credit growth was controlled
centrally. The central questions addressed in this paper are whether households and
corporates are over-indebted now and why this might be a worrying development? Previous
authors have suggested that over-indebtedness may have severe consequences: (i) higher rates
of arrears and bankruptcies, (ii) sharp contractions in investment and consumption, and (iii)
increased fragility in the banking system. The aggregate evidence on indebtedness is
contrasted with micro-data on households, corporates and credit institutions. This paper
concludes that households and corporates may not be over-indebted when (i) account is also
taken of improvements in their debt-service capacity and (ii) micro-data is used to qualify the
aggregate indebtedness data. Furthermore, credit institutions appear to be well insulated
against severe shocks that could potentially arise from households or corporates.
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