New short paper: “Resilience, Debt, and Net Worth: Has Resilience Increased with Higher Debt-to-Income Ratios?”

New short paper, “Resilience, Debt, and Net Worth: Has Resilience Increased with Higher Debt-to-Income Ratios?,” January 2014. 

Resilience, Debt, and Net Worth:  Has Resilience Increased with Higher Debt-to-Income Ratios?

Lars E. O. Svensson

SIFR – The Institute for Financial Research, Swedish House of Finance,
Stockholm School of Economics
The Institute for International Economic Studies, Stockholm University


First draft: November 2012
This version: January 2013


Since 1995, Swedish households’ debt has risen from about 90 percent of disposable income to about 170 percent and hence almost doubled. Many, including the Riksbank, conclude that this has made the households more vulnerable to disturbances. But at the same time, real and financial assets and net worth have approximately doubled. Total assets and net worth are now about 580 percent and 410 percent of disposable income, respectively. This doubling of assets and net worth should contribute to households’ being more resilient to disturbances. This short paper argues that a doubling of the average Swedish household’s balance sheets actually increases resilience, rather than reduces it. Generally, a richer household is more resilient than a poorer one.