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Why do households repay their debt in UK during the COVID-19 crisis?

Mamatzakis, Emmanuel; Ongena, Steven; Tsionas, Mike G (2023). Why do households repay their debt in UK during the COVID-19 crisis? Journal of Economic Studies, 50(8):1789-1823.

Abstract

Purpose: In this paper, the authors investigate whether coronavirus disease 2019 (COVID-19) impacts household finances, like household debt repayments in the UK.
Design/methodology/approach: This paper employs a vector autoregressive (VAR) model that nests neural networks and uses Mixed Data Sampling (MIDAS) techniques. The authors use data information related to COVID-19, financial markets and household finances.
Findings: The authors' results show that household debt repayments' response to the first principal component of COVID-19 shocks is negative, albeit of low magnitude. However, when the authors employ specific COVID-19-related data like vaccines and tests the responses are positive, insinuating the underlying dynamic complexities. Overall, confirmed deaths and hospitalisations negatively affect household debt repayments. The authors also report low persistence in household debt repayments. Generalised impulse response functions (IRFs) confirm the main results. As draconian measures, the lockdowns are eased and the COVID-19 shocks are diminishing, and household financial data converge to the levels prior to the pandemic albeit with some lags.
Originality/value: To the best of the authors' knowledge, this is the first study that examines the impact of the pandemic on household debt repayments. The authors' findings show that policy response in the future should prioritise innovation of new vaccines and testing.

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > General Economics, Econometrics and Finance
Scope:Discipline-based scholarship (basic research)
Language:English
Date:22 November 2023
Deposited On:28 Aug 2023 13:56
Last Modified:30 Oct 2024 02:35
Publisher:Emerald Publishing Limited
ISSN:0144-3585
OA Status:Green
Publisher DOI:https://doi.org/10.1108/JES-10-2022-0540
Other Identification Number:merlin-id:23692
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