International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Household Debt and Domestic Demand: Greece versus other Euro zone Economies
Ersi Athanassiou

Fast household debt growth over a prolonged period of time entails high gains for domestic demand while it lasts, but also severe losses in the event that it is interrupted. Over the period 2008-2011, the financial crisis and the sovereign debt crisis eliminated credit expansion to households in Greece and other Euro zone countries previously experiencing rapid household debt growth. The analysis presented in this paper suggests that this development caused a shift of the net injection contributed by household debt to domestic demand from the highly positive levels experienced up to then to levels considerably below zero. As a result, the role of household debt for domestic demand in these countries changed radically, from that of a major growth driver to that of a weakening factor.

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