Navigating the long shadow of high household debt

Mathias Drehmann, Mikael Juselius, Anton Korinek

Research output: Book/ReportCommissioned report


The global tightening cycle that started in 2022 to curb surging inflation has been unprecedented in speed, size, and international synchronicity. While higher interest rates can dampen activity through many channels, one often-neglected channel may turn out to be particularly important going forward: rising private sector debt burdens associated with past borrowing.From a historical perspective, household debt levels in the U.S. as a fraction of GDP are high (Figure 1), even if they have come down substantially since the Global Financial Crisis (GFC). This deleveraging since the GFC has been facilitated by low interest rates, which prevailed for most of the post-crisis period and served to keep debt service costs manageable. Globally, household debt levels are equally at historical high levels, and many countries, such as Canada and Korea, have not seen any deleveraging since the GCF (also Figure 1). Hence, households and firms in the U.S. and many other economies may prove vulnerable to rapidly rising interest rates. Indeed, our research (Drehmann et al (2023)) highlights that past borrowing can cast a long shadow on economic activity.
Original languageEnglish
Place of PublicationUnited States of America
PublisherBrookings Institution
Publication statusPublished - 2023
MoE publication typeD4 Published development or research report or study

Publication series

PublisherBrookings Institution


  • 511 Economics
  • U.S. economy
  • economic studies


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