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The determinants of household credit in Spain

  • Fernando Nieto

    ()

    (Banco de España)

Registered author(s):

    This paper estimates a single-equation model to analyse the main explanatory factors behind changes in Spanish household credit, considering that the behaviour of its determinants is exogenous. According to the evidence reported, household borrowing is determined in the long run by real spending, gross wealth and the repayment term for outstanding credits, which have a positive influence, and by the cost of loans and the unemployment rate, the effect of which is of a negative sign. Developments in the short run are influenced by changes in long-term interest rates and in employment. The evidence offered suggests that, in general terms, the financing received by households over the period analysed is in line with what may be inferred from its determinants; however, the high volume of debt incurred entails greater exposure of the sector to unexpected changes in its income, in its wealth or in the cost of borrowing, especially in a setting in which floating-rate loans are increasingly significant.

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0716e.pdf
    File Function: First version, June 2007
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    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0716.

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    Length: 28 pages
    Date of creation: Jun 2007
    Date of revision:
    Handle: RePEc:bde:wpaper:0716
    Contact details of provider: Web page: http://www.bde.es/
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    1. Paul Bennett & Richard Peach & Stavros Peristiani, 1998. "Structural change in the mortgage market and the propensity to refinance," Staff Reports 45, Federal Reserve Bank of New York.
    2. Teresa Sastre & José Luis Fernández-Sánchez, 2005. "Un modelo empírico de las decisiones de gasto de las familias españolas," Banco de Espa�a Working Papers 0529, Banco de Espa�a.
    3. Muellbauer, John & Murphy, Anthony, 1997. "Booms and Busts in the UK Housing Market," Economic Journal, Royal Economic Society, vol. 107(445), pages 1701-27, November.
    4. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    5. Ricardo Gimeno & Carmen Martínez-Carrascal, 2006. "The interaction between house prices and loans for house purchase. The Spanish case," Banco de Espa�a Working Papers 0605, Banco de Espa�a.
    6. Boris Hofmann, 2001. "The determinants of private sector credit in industrialised countries: do property prices matter?," BIS Working Papers 108, Bank for International Settlements.
    7. Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
    8. Merxe Tudela & Garry Young, 2005. "The determinants of household debt and balance sheets in the United Kingdom," Bank of England working papers 266, Bank of England.
    9. Davis, E. Philip, 1995. "Debt, Financial Fragility, and Systemic Risk," OUP Catalogue, Oxford University Press, number 9780198233312, March.
    10. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
    11. Silvia Magri, 2002. "Italian households' debt: determinants of demand and supply," Temi di discussione (Economic working papers) 454, Bank of Italy, Economic Research and International Relations Area.
    12. Calza, Alessandro & Manrique, Marta & Sousa, João, 2003. "Aggregate loans to the euro area private sector," Working Paper Series 0202, European Central Bank.
    13. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers 134, Bank of England.
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