The Impact of Price on Household Debt in Developing Countries

Abstract Present economic uncertainty has led to higher prices, especially for essential goods, and increasing inflation rates, which suggests that households may have lower purchasing power. This has led to greater reliance on credit to cover rising living costs, especially for low-income social classes. Hence, this study examines how prices affect household debt in ten developing countries using the autoregressive distributed lags (ARDL) model. The results show that prices and sub-indicators significantly and positively influence debt for the low-income-wealth social class. Therefore, this study proposes targeted support and market competition as key policy strategies. First, it argues for targeted subsidies, facilitated by a comprehensive database, to identify and support the most affected low-income individuals, which will improve subsidy efficiency and government monitoring. Second, the study recommends promoting competition and strengthening market oversight in critical sectors to reduce costs and expand consumer options.