The Role of Debt Dynamics in US Household Consumption

  • Vincent Grossmann-Wirth
  • Clément MarsilliEmail author
Part of the Financial and Monetary Policy Studies book series (FMPS, volume 46)


This chapter documents why US private consumption, while remaining the key engine of US growth, slowed after the financial crisis. To this purpose, we estimate an error-correction model for US consumption, accounting for the role of household debt flows before and after the crisis. Contrary to an analysis carried out in terms of net wealth, a decomposition of households’ assets and liabilities shows how the pre-crisis period was characterized by an excessive indebtedness, which was both a source of short-term growth and of financial instability. In the current “new normal” situation, private consumption cannot rely on debt flows as much as before the crisis. This is, therefore, an important “demand-side” explanation for the much-debated low growth recovery.


Debt Dynamics Debt Flows Private Consumption Excessive Indebtedness Household Balance Sheets 
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© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Banque de FranceParisFrance
  2. 2.International Macroeconomics DivisionBanque de FranceParisFrance

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