And the median duration of those episodes would increase from three to six months, or perhaps more if low-income households bear the brunt of the growth slowdown. This would make households more vulnerable, particularly if they are already highly indebted. This is because the debt burdens of households, relative to incomes, would rise more frequently than in the past.
And this would typically happen when growth is weak and businesses and financial institutions are also relatively more vulnerable. Of course, how worried we should be about indebtedness is related not only to income but also to the value of debtors’ assets. When it comes to households, the most important asset in many jurisdictions is residential property.