Economic, institutional and socio-cultural determinants of consumer credit in the context of monetary integration

Jakub Borowski, Krystian Jaworski and Jakub Olipra

No 254, NBP Working Papers from Narodowy Bank Polski

Abstract: We investigate the determinants of consumer credit in 23 EU countries using panel regressions with fixed effects for 1997–2014. Against our expectations, we found evidence of positive relationship between GDP per capita and volume of consumer credit in relation to nominal GDP. In line with existing literature, our estimates also point to procyclicality of consumer lending and its dependence on young people’s share in population and level of education. Further, consumer credit is driven by development and concentration of the banking sector. The latter relationship supports the effective structure hypothesis. Our results show that credit decreases when supervision is integrated into the central bank. This finding signals that access to consumer credit is harder when political independence of supervision is warranted. Finally, consumer lending is spurred by monetary integration and this result is consistent with permanent income theorem. We were unable to discover a relationship between socio-cultural factors and credit propensity. Identification of this link suggests an avenue for future research. Our results aid in assessing the probability of consumer lending boom and related risk to financial stability. They can be used to increase the effectiveness of macroprudential policy in avoiding excess consumer lending fuelled bymonetary integration.

Keywords: lending boom; consumer credit; monetary integration (search for similar items in EconPapers)
JEL-codes: C33 D12 E51 G29 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-mac
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Journal Article: Economic, institutional, and socio‐cultural determinants of consumer credit in the context of monetary integration (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:254

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