A Lagom Level of Debt: Swedish household indebtedness in the 21st century

Abstract: This thesis studies the causes of rising household and particularly mortgage debt in Sweden between 1995 and 2020. It aims to contribute to the understanding of institutional factors behind increasing debt, such as policy regulating lending. It undertakes a qualitative analysis of previous literature on household debt, and the Financial Accelerator framework. The Financial Accelerator (Bernanke & Gertler, 1989) proposes a procyclical feedback loop between asset values, income, and debt levels. Favourable lending conditions, low interest rates, and an inelastic housing supply are found to be key factors behind the increase in mortgage debt. These factors constitute conditions necessary for a Financial Accelerator to operate, suggesting a high probability that a Financial Accelerator effect is in place.