Finnish household debt accumulation follows economic cycle
Silvo, Aino; Nyholm, Juho (21.06.2022)
JulkaisusarjaBank of Finland. Bulletin
JulkaisijaBank of Finland
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-202207081329
Over recent decades, Finnish households have constantly accumulated debt in relation to their income. The household savings rate has also been mainly negative. However, during recessions households typically save more and accumulate less debt than in economic upswings. Despite the low savings rate and continuous growth in debt, the value of the household sector’s financial wealth has increased faster than the value of its debts. This is attributable to a considerable appreciation in the value of financial assets. As a consequence, the household sector’s financial position has strengthened in spite of the accumulation of debt, resulting in an overall improvement in households’ financial room for manoeuvre. However, asset prices can decrease substantially in a downturn, which would weaken the financial position of households and limit their borrowing capacity.
The accessible version https://www.bofbulletin.fi/en/2022/2/finnish-household-debt-accumulation-follows-economic-cycle/