The rapid increase in household debt under increasing internal and external economic uncertainties could lead to an economic crisis. Household loans in Seoul account for 74.1% of GRDP in 2016. The share of household debt in GRDP is larger in Seoul than in the whole country. The size of household debt in Seoul is steadily increasing. However, there are not many systematic studies on the household debt of Seoul. Since most of the studies are conducted nationwide, it is difficult to diagnose the household debts of Seoul using the existing research results. This study aims to propose the role of Seoul Metropolitan government for the diagnosis and reduction of household debt in Seoul through various methods.

This study consists of six chapters. Chapter 1 describes the background, purpose, content, and method of this study as an introduction. In chapter 2, we discuss the impacts on household debt and the local economy in Seoul. In this chapter, we analyze the household debt of Seoul by macroeconomic analysis. Firstly, we analyze the impact of household debt on the local economy using the static analysis model. Methodologically, multiple regression analysis is performed with three variables including income, household debt, and loan interest rate. Next, to overcome the limitations of static analysis, we use a structural vector autoregression(SVAR) model to perform dynamic analysis. The SVAR model consists of five variables. The five variables are modeled by the channel of financial sector(loan interest rate, household debt) and channel of real sector(business cycle, real estate price, income). We analyze the time path, the change, the size and the effect of the household debt on the change of the main policy variables by the impact response function. In Chapter 3, we examine the index of household debt and analyze the risk of household debt in Seoul. We use the method of composite index to calculate the household debt index, which can be used to assess the household debt level in Seoul. In Chapter 4, we survey the actual state and prospects of household debt in Seoul. The survey is conducted on 1,000 households in Seoul. The survey examines the general status of individual households, the characteristics of assets and liabilities, the prospect of household debt, and the direction of Seoul metropolitan government’s policy in Seoul. In Chapter 5, we deal with the current state and the limitations of policies related to household debt. The last chapter summarizes the implications of this study and suggests policy direction of Seoul metropolitan government.