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Credit and Household Consumption

Author

Listed:
  • Renata Pašalièová
  • Vladimír Stiller

Abstract

The paper emphasizes how changes in credit conditions in the Czech Republic are likely to influence aggregate consumption. Aggregate consumption plays an important role in macroeconomic fluctuations and in the transmission mechanism. Czech household debt has increased in the past five years. The empirical analysis presented in the paper is based on the Life Cycle/Permanent-Income Hypothesis, including a standard model of consumption and incorporating credit supply. We first concluded that credit conditions have a significant impact on household consumption, and that consumption is acutely sensitive to disposable income. Our models further confirmed the acute effect real interest rates have on household consumption. We ultimately concluded that inflation level, growth of real disposable income, and low interest rates support household credit growth.

Suggested Citation

  • Renata Pašalièová & Vladimír Stiller, 2004. "Credit and Household Consumption," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 54(11-12), pages 520-540, November.
    • Handle: RePEc:fau:fauart:v:54:y:2004:i:11-12:p:520-540
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    More about this item

    Keywords

    credit; consumption; household; interest rate; interest-rate spread;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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