Philip Bunn, May Rostom, 12 January 2015

A number of US studies have found a link between high pre-crisis debt and weak consumption after the recent financial crisis. This column investigates the relationship between household debt and consumption in the UK. Spending cuts associated with debt are estimated to have reduced the level of aggregate private consumption by around 2% after 2007, unwinding the faster growth in spending by highly indebted households, relative to other households, before the financial crisis.

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