Profiling Some of the Dire Household Debt Determinants: A Metric Multidimensional Scaling Approach

Abstract

The purpose of this paper was to use the metric Multidimensional scaling (MDS) to explore the ten dire household debt determinants in the context of South Africa. Macroeconomic data used was collected from the South African reserve bank and Statistics South African websites for the first quarters of 1990 to 2013. SPSS 22 was used to execute the analysis. A Standardized Residuals Sum of Squares (STRESS 1) measure calculated as 0.00077confirmed the best fit of the MDS model and the Tucker’s Coefficient of Congruence implied that 99.9% of variance in the model is accounted for by the two dimensions. This was also a confirmation that the ten selected determinants can better be represented in a two dimensional perpetual map. The findings revealed two profiles of household debts. Gross domestic product and house prices are associated with high levels of household debts. The remainder of the determinants is found to have low effects. MDS demonstrated its effectiveness in classifying household debt determinants according to their contribution. Also revealed is that an MDS is a useful tool to use in quantifying the ubiquitous, but slimy, notion of similarity