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Consumption-led expansions

Author

Listed:
  • Enisse Kharroubi
  • Emanuel Kohlscheen

Abstract

GDP growth has increasingly been led by consumption. However, consumption-led expansions tend to be significantly weaker than when growth is driven by other components of aggregate demand, often because of the build-up of imbalances. We show that while factors such as credit growth and rising house prices can boost consumption in the short run, the incidence of consumption-led growth and rising debt service ratios significantly dampen growth in the medium to long run. Policies that address the build-up of imbalances and strengthen investment are therefore central to fostering durable growth.

Suggested Citation

  • Enisse Kharroubi & Emanuel Kohlscheen, 2017. "Consumption-led expansions," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:1703e
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    References listed on IDEAS

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    Cited by:

    1. Galstyan, Vahagn & Mehigan, Caroline & Mercado, Rogelio, 2020. "The currency composition of international portfolio assets," Journal of International Money and Finance, Elsevier, vol. 103(C).
    2. Sabrina Bunyan & David Duffy & George Filis & Ishmael Tingbani, 2018. "Bilateral business cycle synchronisation in the EMU: What is the role of fiscal policy and government size?," Working Papers 2018.02, International Network for Economic Research - INFER.
    3. Öztürk, B. & Stokman, A.C.J., 2019. "Animal spirits and household spending in Europe and the US," Economics Letters, Elsevier, vol. 185(C).
    4. Claudio Borio & Boris Hofmann, 2017. "Is Monetary Policy Less Effective When Interest Rates Are Persistently Low?," RBA Annual Conference Volume (Discontinued), in: Jonathan Hambur & John Simon (ed.),Monetary Policy and Financial Stability in a World of Low Interest Rates, Reserve Bank of Australia.
    5. Öztürk, B. & Stokman, A.C.J., 2019. "Animal spirits and household spending in Europe and the US," Economics Letters, Elsevier, vol. 185(C).

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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