Household borrowing and consumption in Spain
Carmen Martínez-Carrascal () and
Ana Del Rio ()
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Carmen Martínez-Carrascal: Banco de España
Authors registered in the RePEc Author Service: Carmen Martinez Carrascal
No 421, Working Papers from Banco de España, Working Papers Homepage
This paper aims at analysing the impact of household borrowing on consumption. These variables are modelled jointly in a Vector Error Correction Model (VECM) where labour income, wealth variables and nominal interest rates are also included. The main estimation result is that deviations of borrowing from its long-run trend have a significant impact on consumption: when lending is above (below) its long-run level, future consumption contracts (expands). This evidence is also, found in a simpler model in which consumption is not modelled explicitly. In addition, when consumption departs from its long-run level, it seems to be an indicator of changes in future labour income.
Keywords: household debt; consumption; error correction (search for similar items in EconPapers)
JEL-codes: E20 E21 E51 (search for similar items in EconPapers)
Pages: 38 pages
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0421
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