Increasing household debts and its relation to GDP, interest rate and house price: Malaysia’s perspective

The increase in household debts in Malaysia which has escalated to about 86% of total GDP is deemed to be at worrying stage as it may in turn trigger another financial crisis. Thus, the aim of this study is to examine the increase in household debts and its relation to GDP, interest rate and house price via time series techniques. Data collected from Datastream and monthly statistical bulletin span from 1999 to 2014 on quarterly basis. The results show that there is a cointegrating long run relation between household debt, house prices, GDP and interest rate. The analysis indicates that although household debts could not be influenced by the changes in GDP, lending rate and house price in the short run, it could be affected by house price movement in the long run. As there is a positive significant relationship between house price and household debts, it implies that, in the long run horizon, the increase in household debts is due to the increase in house price. Although both GDP and lending rate are found to be endogenous, we still believe that the movement in lending rate and GDP (as a proxy to income) may affect the household debts. Thus, extra care shall be taken by the policy maker for any decision to increase the lending rate in particular as the lending rate is deemed to be one of the macroeconomic policy instruments which may have significant influence on household income. As the lending rate is deemed endogenous, the policy maker should strengthen prudential measure in order to curb the increase in household debts. Shortening the loan tenure, tightening credit policy by implementing responsible and selective lending, higher debt service ratio, strengthening the risk management of banking institutions are amongst the measures that might facilitate the policy maker to combat the rising household debts. Additionally, as the result found that the house price is the main indicator that affects the household debt in the long horizon, the policy maker should take an initiative to control the property price in order to mitigate any bubble in asset price

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

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

Post-Crisis Financial Reform in Korea: A Critical Appraisal

In the aftermath of the economic crisis of 1997-98 South Korea has undertaken a number of financial reforms under IMF auspices. One of such reforms was in financial supervision, which created the Financial Supervisory Commission and the Financial Supervisory Service. In spite of these reforms Korea has recently experienced a costly financial instability relating to credit-card companies and household debts. Korea’s success in bringing about rapid economic recovery from the crisis may have lessened, as suggested by the World Bank, the urgency for full financial reform. This paper, however, argues that the newly created supervisory agencies, although created as independent agencies, have not in fact functioned as such and thus failed to carry out proper supervision over credit-card companies. It is argued that those agencies have not been able to function independently due to institutional constraints imposed on them by other extant, formal as well as informal, institutions in Korea.Financial reform, financial supervision, institutions

The determinants of household debts in Malaysia during the period of: Q3 2009 to Q4 2016 / Muhamad Hateem Khan Ayob Khan

The purpose of this study is to investigate the determinants of household debts in Malaysia during the period of Q3 2009 to Q4 2016. The study use descriptive statistics and ordinary least squared method with normality, serial correlation, heteroscedasticity, multicollinearity test and model specification. The findings of this study show that only two independent variables are significant while the other one is insignificant. Basically this research study based on the previous study Increasing Household Debts and its Relation to GDP, interest rate and House Price: Malaysia’s perspective by Sharezan Rahman and Mansur Masih (2014)

A simple theory of exploding household debts

In this paper, I explore how a household budget constraint allows one to construct a simple theory of exploding household debts. The conclusion reached in this paper is that in case the household started off being indebted, maintaining balanced budget all the time is a very dangerous choice. For analysis, government is assumed to be non-existent

Wage-led growth: An introduction

The past decades have witnessed falling wage shares and a polarization of personal income distribution. Average wages and average labour compensation have not kept up with productivity growth. Functional income distribution has shifted at the expense of labour. In many countries personal income distribution has also become more unequal. By many measures income inequality is worse than at any time in the 20th century. At the same time economic growth processes have become imbalanced. Financial crises have become more frequent; household debts have risen sharply; international imbalances have increased, with some countries relying excessively on export growth. This paper argues that the polarization of income distribution and the decline in the wage share play an important role in the generation of imbalanced and unequal growth, and that a pro-labour wage policy will form an important part of a policy package that generates a stable growth regime. A wage-led growth strategy is thus advocated.Wage-led growth; income distribution; Keynesian economics; economic policy

Rubber plantation labor and labor movements as rubber prices decrease in southern Thailand

A decrease in rubber prices can initiate labor migration trends from rubber production to industrial or service sectors, which could further cause labor shortages in rubber production. This case was not studied in the different communities with a long history of rubber such as the center city of southern Thailand. This study analyzes the source of labor and movement of laborers working in rubber plantations in the context of decreasing rubber prices. We selected 3 representative areas, namely rural, suburban and urban communities in Hat Yai district, Songkhla province. Owners of rubber holdings were the target group for the survey, and individual interviews were conducted. We collected data between March and July 2015, engaging with 207 owners. The results showed that family labor and hired labor were widely used in rubber plantations in the three communities. Locally hired laborers and laborers from other countries were the main sources of hired labor for rubber plantations. The transnational laborers were a secondary source of labor for all communities, especially the rural ones. Family labor was the main source of labor for smallholder rubber plots, especially for the urban and suburban areas. Hired labor was used in all sizes of rubber holding in rural and suburban communities and were very common in the small rubber holdings in urban areas. This shows that the rubber production sector creates employment for local people and for migrants. Furthermore, low rubber price conditions did not significantly impact labor movement in rubber plantations. However, rubber plantations in urban and suburban communities lacked labor supply due to their proximity to the larger urban center of Hat Yai city. Therefore, the low tapping intensity and generate the diversified source of income to attract young labor generation to work on the farms should be policy to maintain natural rubber production in Thailand

Determinants of household debt in Malaysia / Nazirah Aina Zaman Huri

Household debt is the one of the important matters that need to be look seriously and done carefully. An error happens in managing household debt can lead to financial distress and bankruptcy. The aim of this study is to determine the factors of influencing rising in household debt in Malaysia between the variables which is housing price index, unemployment rate, interest rate and savings. This study is using time series data for the period of eleven years by monthly basis starting from January 2009 to March 2019. The regression analysis is employed to investigate whether the five variables construct will have a relationship with the determinants of household debts in Malaysia