A cause for policy concern: the expansion of household credit in middle-income economies

Paulo L. dos Santos

International Review of Applied Economics, 2013, vol. 27, issue 3, 316-338

Abstract: This article discusses the significance of the recent growth in household credit across a range of middle-income economies. This growth is understood primarily as a result of policy, including the promotion of individual borrowing as a means to fund access to housing, education and health. A formal model of credit extension and allocation is developed, establishing that consumption lending makes a comparatively stronger contribution to aggregate profitability as well as financial fragility than production lending. Consumption lending may be understood to create distinctive endogenous tendencies to credit-market instability. The findings point to the need for a critical reconsideration of reliance on this lending for social and macroeconomic policy.

Date: 2013
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DOI: 10.1080/02692171.2012.721755

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