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Missed Payments, Renegotiations, and Household Consumption

Kyriaki G. Louka and Nektarios Michail
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Kyriaki G. Louka: Central Bank of Cyprus and University of Cyprus, Cyprus

South-Eastern Europe Journal of Economics, 2022, vol. 20, issue 1, 31-50

Abstract: The paper examines how consumption habits of borrowers are affected after missing one or more payments or when their loan payments are delayed by more than 90 days. In addition, we investigate how household consumption may be impacted by successful loan restructuring. Using data from the Eurosystem Household Finance and Consumption Survey for 2017, we find that households with late or missed loan payments report a fall in consumption levels and those with loans in arrears register an increase in consumption. This suggests that a household's failure to fulfil its commitments may actually help it increase its consumption. Other determinants that affect household consumption and income disparities are also considered to be explanatory variables.

Keywords: In-House/Out-of-House Consumption; HFCS; Non-Performing Loans (search for similar items in EconPapers)
JEL-codes: C21 E21 G21 (search for similar items in EconPapers)
Date: 2022
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