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.
Volume (Year): (2017)
Issue (Month): (March)
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- Campbell, John Y. & Cocco, Joao F., 2007.
"How do house prices affect consumption? Evidence from micro data,"
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- Kostas Tsatsaronis & Haibin Zhu, 2004. "What drives housing price dynamics: cross-country evidence," BIS Quarterly Review, Bank for International Settlements, March. Full references (including those not matched with items on IDEAS)
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