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The determinants of household credit in Spain

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  • Fernando Nieto

    ()
    (Banco de España)

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    Abstract

    This paper estimates a single-equation model to analyse the main explanatory factors behind changes in Spanish household credit, considering that the behaviour of its determinants is exogenous. According to the evidence reported, household borrowing is determined in the long run by real spending, gross wealth and the repayment term for outstanding credits, which have a positive influence, and by the cost of loans and the unemployment rate, the effect of which is of a negative sign. Developments in the short run are influenced by changes in long-term interest rates and in employment. The evidence offered suggests that, in general terms, the financing received by households over the period analysed is in line with what may be inferred from its determinants; however, the high volume of debt incurred entails greater exposure of the sector to unexpected changes in its income, in its wealth or in the cost of borrowing, especially in a setting in which floating-rate loans are increasingly significant.

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0716e.pdf
    File Function: First version, June 2007
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    Bibliographic Info

    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0716.

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    Length: 28 pages
    Date of creation: Jun 2007
    Date of revision:
    Handle: RePEc:bde:wpaper:0716

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    Keywords: credit; household; error correction;

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    References

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    1. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers, Bank of England 134, Bank of England.
    2. Ricardo Gimeno & Carmen Martínez-Carrascal, 2006. "The interaction between house prices and loans for house purchase. The Spanish case," Banco de Espa�a Working Papers, Banco de Espa�a 0605, Banco de Espa�a.
    3. Simon G. Gilchrist & Ben Bernanke & Mark Gertler, 1994. "The financial accelerator and the flight to quality," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 94-18, Board of Governors of the Federal Reserve System (U.S.).
    4. Bennett, Paul & Peach, Richard & Peristiani, Stavros, 2001. "Structural Change in the Mortgage Market and the Propensity to Refinance," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 33(4), pages 955-75, November.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
    6. Calza, Alessandro & Manrique, Marta & Sousa, João, 2003. "Aggregate loans to the euro area private sector," Working Paper Series, European Central Bank 0202, European Central Bank.
    7. Silvia Magri, 2002. "Italian households' debt: determinants of demand and supply," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 454, Bank of Italy, Economic Research and International Relations Area.
    8. Davis, E. Philip, 1995. "Debt, Financial Fragility, and Systemic Risk," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198233312, October.
    9. Muellbauer, John & Murphy, Anthony, 1997. "Booms and Busts in the UK Housing Market," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(445), pages 1701-27, November.
    10. Teresa Sastre & José Luis Fernández-Sánchez, 2005. "Un modelo empírico de las decisiones de gasto de las familias españolas," Banco de Espa�a Working Papers, Banco de Espa�a 0529, Banco de Espa�a.
    11. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 739-764, June.
    12. Merxe Tudela & Garry Young, 2005. "The determinants of household debt and balance sheets in the United Kingdom," Bank of England working papers, Bank of England 266, Bank of England.
    13. Boris Hofmann, 2001. "The determinants of private sector credit in industrialised countries: do property prices matter?," BIS Working Papers 108, Bank for International Settlements.
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    Cited by:
    1. repec:etr:series:v:3:y:2012:i:11:p:341-350 is not listed on IDEAS
    2. Lobna ABID & Zouari Dorra & Zouari Ghorbel Sonia, 2012. "Household indebtedness in Tunisia," E3 Journal of Business Management and Economics., E3 Journals, E3 Journals, vol. 3(10), pages 341-350.
    3. Meniago, Christelle & Mukuddem-Petersen, Janine & Petersen, Mark A. & Mongale, Itumeleng P., 2013. "What causes household debt to increase in South Africa?," Economic Modelling, Elsevier, Elsevier, vol. 33(C), pages 482-492.

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