Lecture series
Household finances: prices, rates and wages, and what borrowers can repay
A borrower repays out of a household budget. This course explains the numbers that move that budget, prices, wages, interest rates and debt, where each market publishes them, and how a lender can use them to judge what households can afford.
7 of 7 lessons published. Lesson 1 is free to read.
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- 01Consumer prices: headline, core and base effectsThe consumer price index is the most watched number about a household's costs. To read it well, a lender needs to know what is in the basket, how the inflation rate is calculated from it, what core inflation leaves out, and why the rate can move when prices do not.
- 02The cost of living for lower-income householdsThe national consumer price index describes an average household. Lower-income households spend a larger share of their budget on food and other essentials, so when those prices rise faster than the rest, their cost of living rises faster than the headline rate. One market, the Philippines, publishes a separate index for its lower-income households.
- 03Wages: nominal and real, minimum wages and informal incomePrices are one side of a household budget; income is the other. What matters for repayment is how pay compares with prices, which workers the wage statistics describe, how minimum wages are set, and how much household income is informal or sent from abroad.
- 04From the policy rate to the household's instalmentWhen a central bank changes its policy rate, a borrower does not feel it at once. The change passes through money markets and banks' funding costs to the rates on new and existing loans, and only then to the instalment a household pays each month. How far and how fast it travels depends on how loans are priced.
- 05Household debt: levels and the burden of repaymentHousehold debt can be measured as a stock, how much is owed, or as a flow, how much of income goes to repaying it each month. Central banks in the region publish both. This lesson explains the two measures, what the research says about high debt, and how a regulator can cap the burden of repayment.
- 06Shocks: food and fuel prices, remittances and disastersA borrower can stop paying even when the loan was affordable on the day it was made, because something can change afterwards: prices jump, a source of income dries up, or a disaster destroys what the household owns. This lesson describes the three kinds of shock, what international data show about each, and how a lender can prepare before one arrives.
- 07Putting it together: a household dashboard for lendersThe earlier lessons each looked at one force on a household budget: prices, wages, interest rates, debt and shocks. This lesson brings them together. It sets out the indicators a lender can watch, a simple measure of the buffer a borrower has left, how to stress that buffer, and what signals call for tightening or easing.
Quiz and certificate 10 questions; those on lesson 1 are free to try. Read every published lesson and score 80% or more for a certificate of completion.
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