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Hamid Raza

Hamid Raza

is an Assistant Professor in Economics at Aalborg University. A major part of his research is devoted to developing macroeconomic models for open economies with a focus on the link between financial and real side of the economy. His research work has a strong empirical focus. He is currently involved in several projects, which broadly includes Monetary policy and Securitisation, Inequality, Empirical Stock-Flow Consistent Macroeconomic models.

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Mikael Byrialsen, Hamid Raza: Household Debt and Macroeconomic Stability: An Empirical SFC Model for the Danish Economy

In the current environment of very low interest rates, Denmark has experienced a sharp increase in property prices and currently has the highest debt to income ratio amongst OECD countries. This has raised some concerns regarding the vulnerability of the Danish economy to scenarios such as a sudden fall in the house prices or increases in the interest rate. This paper attempts to address this issue by building an empirical macroeconomic model for Denmark, a small open economy with fixed exchange rate. To do so, we adopt a stock-flow consistent approach, using annual data on Danish national accounts. Our model has five main sectors namely, household, firms, financial corporations, government, and the rest of the world (Row) sectors. We analyse the model for two shocks; i) an increase in interest rates, and ii) a fall in house prices. Overall, our model suggests that a high household debt can magnify macroeconomic risks especially when the economy is hit by unexpected shocks.

Last modified: 2019.09.05.