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Consumption and Credit Constraints : International Evidence

  • Philippe BACCHETTA
  • Stefan GERLACH

If some consumers are liquidity-constrained, aggregate consumption should be `excessively sensitive' to credit conditions as well as to income. Moreover, the `excess sensitivity' may vary over time. Using data for the United States, Canada, the United Kingdom, Japan and France, we find a substantial impact of credit aggregates on consumption in all countries considered. Moreover, the borrowing/lending wedge is a significant determinant of consumption in the United States, Canada and Japan. Using extended Kalman filtering techniques, we show that the excess sensitivity varies over time, with a clear tendency to decline in the United States.

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Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 9707.

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Length: 27 pages
Date of creation: Aug 1997
Date of revision:
Publication status: Published in Journal of Monetary Economics, vol.40, No 2, 1997, pp. 207-238
Handle: RePEc:lau:crdeep:9707
Contact details of provider: Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.20
Web page:

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  1. Jappelli, Tullio & Pagano, Marco, 1989. "Consumption and Capital Market Imperfections: An International Comparison," American Economic Review, American Economic Association, vol. 79(5), pages 1088-1105, December.
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  17. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
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