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Volume 54, Issue 11 -12


Credit and Household Consumption

Pašaličová, Renata; Stiller, Vladimír

Year: 2004   Volume: 54   Issue: 11 -12   Pages: 520-540

Abstract: The paper emphasizes how changes in credit conditions in the Czech Republic are likely to influence aggregate consumption. Aggregate consumption plays an important role in macroeconomic fluctuations and in the transmission mechanism. Czech household debt has increased in the past five years. The empirical analysis presented in the paper is based on the Life Cycle/Permanent-Income Hypothesis, including a standard model of consumption and incorporating credit supply. We first concluded that credit conditions have a significant impact on household consumption, and that consumption is acutely sensitive to disposable income. Our models further confirmed the acute effect real interest rates have on household consumption. We ultimately concluded that inflation level, growth of real disposable income, and low interest rates support household credit growth.

JEL classification: E13, E21, E51, E59, C22

Keywords: credit; consumption; household; interest rate; interest-rate spread


RePEc: n/a

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