The impact of consumer lending on consumption volume and volatility

The global trend of accelerated growth of bank lending to households in recent decades has macroeconomic consequences, affecting the economic cycle, consumption, economic structure and prices. The article discusses the impact of consumer lending on consumption in Russia. Using annual and quarterly data on consumption and lending, based on econometric methods we show that consumer bank lending in Russia is not a smoothing factor, but a factor of additional volatility of consumption. With an increase in households’ income, they take out loans more actively. An increase in consumption in the year of borrowing is replaced by a statistically significant decrease in the following two years, which levels out about half of the initial effect. Additional consumption due to loans changes the price structure in favor of services, non-food products and alcohol, and also affects the structure of output in favor of non-tradable goods and services. This is consistent with the findings of researchers for other countries.