A Brief Note on Thailand Household Debt Dynamics, Fisher Effects, and Monetary Policy Transmission
Thailand’s experience illustrates the intricate relationship between monetary policy and household debt, examined through a framework that separates changes in debt into net new borrowing and the Fisher effect. Findings show that monetary policy generates intertemporal trade-offs: while easing measures can relieve short-term debt burdens, they also stimulate long-term debt accumulation. The effectiveness of these policies proves to be state-dependent, with stronger impacts during low-leverage periods than in high-leverage environments where new borrowing is already constrained. Overall, the evidence highlights the crucial need to account for credit cycle dynamics when formulating monetary policy to manage household debt and safeguard financial stability.