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A Dynamic Model of Money, Credit, and Consumption: A Joint Model for the UK Household Sector

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  • Chrystal, K Alec
  • Mizen, Paul

Abstract

Previous research has investigated consumers' expenditure and money demand as separable equations. We estimate them jointly as driven by the same influences. Credit is also included as a potential third variable that might provide a source of additional information about the monetary transmission mechanism. Consumption, money, and lending equations are modelled as an interdependent system, and the significance of lending for consumption and money is tested. The results using UK household sector data show that a stable credit equation does exist in parallel with money demand and consumption equations, and that interactions modelled in a conditional vector equilibrium correction system are favoured over independent equations.

Suggested Citation

  • Chrystal, K Alec & Mizen, Paul, 2005. "A Dynamic Model of Money, Credit, and Consumption: A Joint Model for the UK Household Sector," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(1), pages 119-143, February.
    • Handle: RePEc:mcb:jmoncb:v:37:y:2005:i:1:p:119-43
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    Cited by:

    1. Ricardo Barradas & Ines Tomas, 2023. "Household indebtedness in the European Union countries: Going beyond the mainstream interpretation," PSL Quarterly Review, Economia civile, vol. 76(304), pages 21-49.
    2. Jawadi, Fredj & Sousa, Ricardo M., 2013. "Money demand in the euro area, the US and the UK: Assessing the role of nonlinearity," Economic Modelling, Elsevier, vol. 32(C), pages 507-515.
    3. Agustín Saade & Daniel Osorio & Dairo Estrada, 2007. "An equilibrium approach to financial stability analysis: the Colombian case," Annals of Finance, Springer, vol. 3(1), pages 75-105, January.
    4. Sophocles N. Brissimis & Eugenie N. Garganas & Stephen G. Hall, 2014. "Consumer credit in an era of financial liberalization: an overreaction to repressed demand?," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 139-152, January.
    5. Glenn Lauren Moore & Engelbert Stockhammer, 2018. "The drivers of household indebtedness reconsidered: An empirical evaluation of competing arguments on the macroeconomic determinants of household indebtedness in OECD countries," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 41(4), pages 547-577, October.
    6. James Cloyne & Ryland Thomas & Alex Tuckett & Samuel Wills, 2015. "An Empirical Sectoral Model of Unconventional Monetary Policy: The Impact of QE," Manchester School, University of Manchester, vol. 83, pages 51-82, September.
    7. repec:pra:mprapa:40579 is not listed on IDEAS
    8. Stockhammer, Engelbert & Wildauer, Rafael, 2018. "Expenditure Cascades, Low Interest Rates or Property Booms? Determinants of Household Debt in OECD Countries," Review of Behavioral Economics, now publishers, vol. 5(2), pages 85-121, September.
    9. Serwa, Dobromił, 2013. "Identifying multiple regimes in the model of credit to households," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 198-208.
    10. Jane Brown & Anders Wäppling & Helen Woodruffe-Burton & Kate Black, 2017. "The orbit of consumer credit choices," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 22(2), pages 85-96, June.
    11. Rubaszek, Michał & Serwa, Dobromił, 2014. "Determinants of credit to households: An approach using the life-cycle model," Economic Systems, Elsevier, vol. 38(4), pages 572-587.
    12. Emilio Fernandez-Corugedo & John Muellbauer, 2006. "Consumer credit conditions in the United Kingdom," Bank of England working papers 314, Bank of England.
    13. V. A. Pankova, 2022. "Modeling the Dynamics of Retail Lending in Russia: a Relationship with the Dynamics of Household Savings, Incomes, and Expenses," Studies on Russian Economic Development, Springer, vol. 33(6), pages 723-735, December.
    14. Massimiliano Affinito & Raffaele Santioni & Luca Tomassetti, 2023. "Inside household debt: disentangling mortgages and consumer credit, and household and bank factors. Evidence from Italy," Questioni di Economia e Finanza (Occasional Papers) 788, Bank of Italy, Economic Research and International Relations Area.

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