The Impact of Macroeconomic and Environmental Factors on Household Debts in G7 Countries

Abstract

This article aims to study the influence of macroeconomic and ecological factors on household debts. The quantitative method of OLS multiple Regression is applied to the data used for this research from the period 2003 to 2021. To establish the macroeconomic factor, the metrics are the real house price index with the base year 2015, unemployment as % of the labour force, and short-term interest rate per annum. Research shows that house price and unemployment have a noteworthy relationship with the dependent variable, while trade in goods significantly adversely affects household debt. In respect to the climate change factors, results reveal that annual surface temperature and annual emissions of CO2 have a favourable and notable impact on household debt. The only insignificant effect on household debts had been shown by the short interest rate. The beneficiaries of this research can include policymakers, economists, and financial institutions who are interested in understanding the factors that affect household debts. The significant relationship between household debt and factors such as house prices, unemployment, export trade, climate change factors, etc. reflect underlying economic disparities in these countries. The results of this research could benefit policymakers and economist in farther understanding the environmental factors that influence household debts.