Household Credit and Growth: International Evidence

This paper has two main objectives. First, it attempts to distinguish the effects of household and enterprise credit on economic growth for a large sample of developing and developed countries. Second, it investigates the channels through which household credit affects economic growth. To do so, a new database covering 143 countries over the period 1995-2014 is employed. Econometric results show that household credit has a negative effect on growth, while business credit has a positive, albeit non significant, impact on growth. The literature provide two possible explanations to justify the negative effect of household credit. On the one hand, household credit expansion can induce more financial fragility. On the other hand, the negative impact of household credit could be explained by its effect on saving behaviors. Results provide some evidence indicating that the negative effect of household credit is more driven by the latter than the former.

Léon F. (2019) "Household credit and growth: International evidence," CREA Discussion Paper Series 2019-02