Swedish Household Debt and the Effect of the European Union -An Econometric Time Series Analysis on Debt Ratio in Sweden

Abstract

This paper examines the development of the debt ratio of Swedish households from 1987-2020 as well as its driving forces. By using econometric time series analysis variables that are suspected to impact the debt ratio are tested, including a dummy variable for the time since Sweden became a member of the European Union. Theories of leverage, supply and demand in the mortgage market and the case for free trade are used to provide depth to the thesis. Statistically significant results are found for the variables mortgage bonds, inflation, and EU-membership. While inflation exhibits a negative effect on the debt ratio, mortgage bonds and the dummy variable for EU-membership displays a positive relationship on the debt ratio.