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A Dynamic Model of Money, Credit, and Consumption: A Joint Model for the UK Household Sector

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  • Chrystal, K Alec
  • Mizen, Paul

Abstract

Previous research has investigated consumers' expenditure and money demand as separable equations. We estimate them jointly as driven by the same influences. Credit is also included as a potential third variable that might provide a source of additional information about the monetary transmission mechanism. Consumption, money, and lending equations are modelled as an interdependent system, and the significance of lending for consumption and money is tested. The results using UK household sector data show that a stable credit equation does exist in parallel with money demand and consumption equations, and that interactions modelled in a conditional vector equilibrium correction system are favoured over independent equations.

Suggested Citation

  • Chrystal, K Alec & Mizen, Paul, 2005. "A Dynamic Model of Money, Credit, and Consumption: A Joint Model for the UK Household Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 119-143, February.
  • Handle: RePEc:mcb:jmoncb:v:37:y:2005:i:1:p:119-43
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    Cited by:

    1. Stockhammer, Engelbert & Wildauer, Rafael, 2017. "Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries," Economics Discussion Papers 2017-3, School of Economics, Kingston University London.
    2. Jawadi, Fredj & Sousa, Ricardo M., 2013. "Money demand in the euro area, the US and the UK: Assessing the role of nonlinearity," Economic Modelling, Elsevier, vol. 32(C), pages 507-515.
    3. Sophocles N. Brissimis & Eugenie N. Garganas & Stephen G. Hall, 2014. "Consumer credit in an era of financial liberalization: an overreaction to repressed demand?," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 139-152, January.
    4. James Cloyne & Ryland Thomas & Alex Tuckett & Samuel Wills, 2015. "An Empirical Sectoral Model of Unconventional Monetary Policy: The Impact of QE," Manchester School, University of Manchester, vol. 83, pages 51-82, September.
    5. repec:pra:mprapa:40579 is not listed on IDEAS
    6. Rubaszek, Michał & Serwa, Dobromił, 2014. "Determinants of credit to households: An approach using the life-cycle model," Economic Systems, Elsevier, vol. 38(4), pages 572-587.
    7. Emilio Fernandez-Corugedo & John Muellbauer, 2006. "Consumer credit conditions in the United Kingdom," Bank of England working papers 314, Bank of England.
    8. Serwa, Dobromił, 2013. "Identifying multiple regimes in the model of credit to households," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 198-208.

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