Abstract The evolution of debt-income ratios over time depends on income growth, inflation, and interest rates, independent of any changes in borrowing. We examine the effect of these "Fisher dynamics" on household debt-income ratios in the United States over the period 1929–2011. Adapting a standard decomposition of public debt to household sector debt, we show that these factors explain, in accounting terms, a large fraction of the changes in household debt-income ratios observed historically. More recently, debt defaults have also been important. Changes in household debt-income ratios over time cannot be straightforwardly interpreted as reflecting shifts in the supply and demand of household credit.

Citation Mason, J. W., and Arjun Jayadev. 2014. ""Fisher Dynamics" in US Household Debt, 1929-2011." American Economic Journal: Macroeconomics , 6 (3): 214-34 . DOI: 10.1257/mac.6.3.214 Choose Format: BibTeX EndNote Refer/BibIX RIS Tab-Delimited