Previous studies on the relationship between household debt and private consumption have produced mixed results. Despite the intense debate on the effect of household debt on private consumption, there is no study explicitly takes the disaggregate level of household debt into consideration. Therefore, this study aims to extend beyond the standard investigation on the relationship between household debt and private consumption by taking a more granular view of the effect of property and consumer debt in Malaysia. Using time series econometric approaches and quarterly data of Malaysia from 1997-2016, this study finds that there is a negative relationship between consumption debt and private consumption. More importantly, this study also shows that consumption debt is the major cause for private consumption while, property debt has no significant effect on private consumption.
household debt; consumption debt; property debt; private consumption