Central Bank interest rate decisions, household indebtedness, and psychiatric morbidity and distress: evidence from the UK

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Boyce, Christopher J., Delaney, Liam, Ferguson, Eamonn and Wood, Alex M. (2018) Central Bank interest rate decisions, household indebtedness, and psychiatric morbidity and distress: evidence from the UK. Journal of Affective Disorders, 234 . pp. 311-317. ISSN 1573-2517

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Official URL: https://www.sciencedirect.com/science/article/pii/S0165032717316622?via%3Dihub

Abstract

Background: Central banks set economy-wide interest rates to meet exclusively economic objectives. There is a strong link between indebtedness and psychiatric morbidity at the individual level, with interest rates being an important factor determining ability to repay debt. However, no prior research has explored whether central bank interest rate changes directly inﬂuence mental health, nor whether this varies by levels of indebtedness.

Methods: We use British data (N = 93,255) to explore whether the Bank of England base-rate aﬀected how perceived burden of non-mortgage debt (low, medium, and high) inﬂuenced psychiatric morbidity. Psychiatric morbidity was measured using the General Health Questionnaire (GHQ-12). Our primary outcome measure was a binary indicator of “psychiatric caseness ” (> 3 on a 0–12 scale). We also used the GHQ-12 as a continuous measure of distress.

Results: When interest rates are high (low) there is an increased (decreased) risk of psychiatric morbidity only among those with a high debt burden (b = 0.026, p= 0.02). This result was robust to alternative explanations.Thus a 1 percentage point base-rate increase is associated with a 2.6% increase that someone with a high debt burden will experience psychiatric morbidity.Limitations: Our study uses subjective indicators of debt burden. We were unable to determine the mechanism behind our eﬀect.

Conclusions: Changes in central bank interest rates to meet economic objectives pose a threat to mental health.Mental health support is needed for those in debt and central banks may need to consider how their decisions inﬂuence population mental health

Item Type:	Article
RIS ID:	https://nottingham-repository.worktribe.com/output/943223
Schools/Departments:	University of Nottingham, UK > Faculty of Science > School of Psychology
Identification Number:	https://doi.org/10.1016/j.jad.2018.03.003
Depositing User:	Ferguson, Eamonn
Date Deposited:	24 Apr 2018 15:23
Last Modified:	04 May 2020 19:43
URI:	https://eprints.nottingham.ac.uk/id/eprint/51352

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