Economic Commentary: Definitions of income and debt in Sweden


The debt-to-income (DTI) ratio is frequently discussed in conjunction with possible macroprudential measures to restrict the build-up of vulnerabilities among Swedish households. This Economic Commentary illustrates how the DTI ratio can vary depending on the definition of income and debt used, and whether the ratio is based on individuals or households. The DTI definition employed is likely to influence the effect of any DTI policy implemented.

Income and debt may be defined in different ways depending on the source, sample and treatment of the data. This in turn may lead to different assessments of household indebtedness, both in terms of levels and distribution of debt, and in terms of what a reasonable DTI limit may be if introduced. To assess the extent to which households are vulnerable to economic or financial shocks as well as exposed to policy shocks, it is important to evaluate scenarios and expected policy effects for different measures of the DTI ratio.

Based on the Riksbank's credit data of borrowers from the eight largest banks in Sweden, this Economic Commentary aims to illustrate how various definitions of income and debt, on both the individual and household level, can influence the level and distribution of the DTI ratio.



By Peter van Santen and Dilan Ölcer.
The authors work in the Monetary Policy Department and Financial Stability Department of the Riksbank.

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