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Interest Rates and the Time-Varying Dynamics of Household Credit Growth

Author

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  • Hofner D. Rusiana
  • Cesar L. Escalante

Abstract

This paper examines the relationship between real interest rate fluctuations and household credit growth by analyzing revolving and non-revolving credit transactions. Using monthly U.S. data from 1990–2025, results show that credit and key macroeconomic variables are integrated of order one and cointegrated, indicating stable long-run equilibrium relationships. Vector Error Correction Model (VECM) estimates show that both credit types adjust gradually toward equilibrium following macroeconomic shocks, though at different speeds of adjustment. Structural break tests, recursive cumulative sum (CUSUM) procedures, and rolling regressions suggest that there is a time variation in the interest rate sensitivity of revolving credit that contrasts the more stable trend observed among non-revolving credit transactions. JEL classification numbers: E43, E52, G51, C32.

Suggested Citation

  • Hofner D. Rusiana & Cesar L. Escalante, 2026. "Interest Rates and the Time-Varying Dynamics of Household Credit Growth," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 16(3), pages 1-4.
    • Handle: RePEc:spt:apfiba:v:16:y:2026:i:3:f:16_3_4
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    References listed on IDEAS

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    1. Boivin, Jean & Kiley, Michael T. & Mishkin, Frederic S., 2010. "How Has the Monetary Transmission Mechanism Evolved Over Time?," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 8, pages 369-422, Elsevier.
    2. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    3. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    4. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
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    More about this item

    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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