Long-run credit growth in the US

Thomas A. Durkin, John Ord and David A. Walker

Journal of Economics and Business, 2010, vol. 62, issue 5, 383-400

Abstract: The paper explores the long-term income elasticity of consumer and mortgage credit growth since World War II. It also examines other economic factors, to determine whether recent credit use is anomalous. Two-stage least squares show consumer credit income elasticity to be slightly below 1.0, taking other factors into account. A vector autoregressive error correction (VAREC) model for cointegrated variables with unit roots determine short-run and long-run credit impact multipliers which are consistent with the elasticities. Except for 1974-1979, the long-run consumer credit impact multiplier of 0.23 is very close to the debt-income limit that Enthoven projected as long ago as 1957. These results are very different from the simplistic media perspectives.

Keywords: Consumer; credit (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:62:y::i:5:p:383-400

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