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Economic uncertainty, households’ credit situations, and higher education

Author

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  • Koirala, Niraj P.
  • Koirala, Dhiroj Prasad
  • Nyiwul, Linus
  • Hu, Zhining

Abstract

In this paper, we study the relationship between economic uncertainty, households’ credit situations, and educational outcomes. Using the System Generalized Methods of Moments (SYS-GMM) on educational and economic data from the World Bank and IMF, we find that economic uncertainty and households’ access to credit have positive impacts on higher education. Further analyses suggest that economic uncertainty and households’ access to credit have heterogeneous effects on educational outcomes at the tertiary level, by gender and development status. Specifically, we find that economic uncertainties expand enrollments in developed countries and contract them in developing economies. In addition, access to credit has a more pronounced positive impact on educational outcomes in developing nations compared to developed ones. Furthermore, our analysis indicates that household credit coupled with economic uncertainty decreases women’s educational outcomes in higher education, posing a serious threat to gender equality in higher education. Lastly, we find that monetary policy appears to play a role in these results. These findings remain robust to alternative proxies of economic uncertainty and approach such as the Instrumental Variable (IV) regression method, which uses a political database on government changes and ideological gaps between cabinets as instruments. In general, the findings emphasize the enduring influence of economic uncertainties, typically associated with business cycles, on long-term aspects such as education.

Suggested Citation

  • Koirala, Niraj P. & Koirala, Dhiroj Prasad & Nyiwul, Linus & Hu, Zhining, 2024. "Economic uncertainty, households’ credit situations, and higher education," Journal of Macroeconomics, Elsevier, vol. 80(C).
  • Handle: RePEc:eee:jmacro:v:80:y:2024:i:c:s0164070424000132
    DOI: 10.1016/j.jmacro.2024.103598
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    More about this item

    Keywords

    Economic uncertainty; Higher education enrollments; Households’ financial situation; Monetary policy; IV regression; SYS-GMM;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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