Reference : Household credit and growth: International evidence
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Business & economic sciences : Macroeconomics & monetary economics
Household credit and growth: International evidence
Leon, Florian mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
[en] Financial Development ; Household credit ; Savings
[en] This paper has two main objectives. First, it attempts to distinguish the effects of household and enterprise credit on economic growth for a large sample of developing and developed
countries. Second, it investigates the channels through which household credit affects economic
growth. To do so, a new database covering 143 countries over the period 1995-2014 is employed.
Econometric results show that household credit has a negative effect on growth, while business
credit has a positive, albeit non significant, impact on growth. The literature provide two possible explanations to justify the negative effect of household credit. On the one hand, household
credit expansion can induce more financial fragility. On the other hand, the negative impact
of household credit could be explained by its effect on saving behaviors. Results provide some
evidence indicating that the negative effect of household credit is more driven by the latter than
the former.

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