Debt availability : The impact of repo-rate policy on household borrowing in Sweden: A study of the relationship between the nominal interest rate and the availability of debt for Swedish households.

Households availability to accrue debt remains a major factor affecting both consumption and savings on an aggregate level. The financial crises at the end of 2007 echoed through the Atlantic ocean and hit the European economies, wrecking havoc as it went. Both nominal and real interest rates plummeted as centrals banks tried to conduct damage control in their respective regions. With some nominal interest rates falling past the zero lower bound and inflation hovering around zero percentage points. The recovery of American and European economies is still ongoing but this process is largely dependent on monetary and fiscal policies by central banks and governments. This thesis examines the relationship between the nominal interest rate and the availability of debt for households, using secondary cross sectional survey data and recorded financial data accumulated over a period of ten years collected every other year. This study limits itself to the country of Sweden and includes different independent variables separate of the nominal interest rate, accounting for some variation and internal effects of the data as well as theoretical considerations. In consensus with previous studies the relationship between the availability of household debt and the nominal interest rate is negative and statistically significant in nature. Indicating that the validity of the classical relationship between nominal interest rate, savings and consumption is affirmed.