Recently, U.S. households have committed a rising share of disposable personal income to required principal and interest payments on household debt. Studies of the direct link between the household debt service ratio (DSR) and consumption show mixed results - perhaps because debt may instead...

Liquidity constraints have been proposed as an important explanation for deviations from the rational expectations/permanent income hypothesis. This paper introduces to the liquidity constraint literature the ratio of a household's debt payments to its disposable personal income (DSR). We find...

Past research argues that changes in adjustable-rate mortgage (ARM) payments may lead households to cut back on consumption. These outcomes are more likely if ARM borrowers are borrowing constrained, and we show in this paper that ARM borrowers exhibit attitudes towards borrowing and behavior...