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Determinants of Household Debt in Botswana
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The paper identifies the factors that are influential in determining the growth of household debt in Botswana. Understanding the relationship between household debt and other economic indicators is an important step towards formulating focused and effec

Research Group
 Macroeconomic Forecasting

Date
  28th June 2017

Author
 Faith M. Zimunya; Mpho Raboloko

Keywords
  Household debt; vector error correction model; long run

statement

The paper identifies the factors that are influential in determining the growth of household debt in
Botswana. Understanding the relationship between household debt and other economic indicators is an
important step towards formulating focused and effective policies that control the effects of household
debt on the whole economy. Using quarterly data from the first quarter of 1994 to the second quarter of
2012, the paper employs the Vector Error Correction Model (VECM) to analyse the influence of Gross
Domestic Product (GDP) per capita, interest rates, inflation, household consumption and money supply
on household debt. The findings indicate that GDP per capita, interest rates and money supply
determine changes in household debt in the long-run. Further analysis shows that lagged household
debt, interest rates and money supply influence changes in household debt in the short-run.
 
 
 
 
 

 


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