Do households with debt cut back their consumption more? New evidence from the United Kingdom

We investigate whether the debt position of UK households affects response nondurable consumption to income and wealth changes. construct a novel estimate track same individual over time for an extended period ranging from 1993 2017. Using this series, we explore how household indebtedness propagates negative positive changes responses. assess shocks imply adjustments such mechanism is crisis specific. Our evidence reveals that falls in trigger substantially larger than rises with debt, while findings are less conclusive. The results also point macro-financial link between overhang consumer spending, which carries implications macro-prudential policy makers aiming ensure resilience. These effects not specific financial period.