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

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  • Paulo L. dos Santos

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.

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  • Paulo L. dos Santos, 2013. "A cause for policy concern: the expansion of household credit in middle-income economies," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(3), pages 316-338, May.
    • Handle: RePEc:taf:irapec:v:27:y:2013:i:3:p:316-338
    DOI: 10.1080/02692171.2012.721755
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    References listed on IDEAS

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    1. Beck Thorsten & Büyükkarabacak Berrak & Rioja Felix K. & Valev Neven T., 2012. "Who Gets the Credit? And Does It Matter? Household vs. Firm Lending Across Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-46, March.
    2. Berger, Allen N. & DeYoung, Robert, 2006. "Technological Progress and the Geographic Expansion of the Banking Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1483-1513, September.
    3. Bordo, Michael D. & Meissner, Christopher M., 2012. "Does inequality lead to a financial crisis?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2147-2161.
    4. Urdapilleta, Eduardo & Stephanou, Constantinos, 2009. "Banking in Brazil: Structure, Performance, Drivers, and Policy Implications," Policy Research Working Paper Series 4809, The World Bank.
    5. Joshua Mason and Arjun Jayadev, "undated". "Fisher Dynamics in Household Debt: The Case of the U.S. 1929-2011," Working Papers 13, University of Massachusetts Boston, Economics Department.
    6. Enrica Detragiache & Thierry Tressel & Poonam Gupta, 2008. "Foreign Banks in Poor Countries: Theory and Evidence," Journal of Finance, American Finance Association, vol. 63(5), pages 2123-2160, October.
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    Cited by:

    1. Ewa Karwowski & Engelbert Stockhammer, 2017. "Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies," Economic and Political Studies, Taylor & Francis Journals, vol. 5(1), pages 60-86, January.
    2. Karwowski, Ewa, 2017. "Corporate financialisation in South Africa: From investment strike to housing bubble," Economics Discussion Papers 2017-7, School of Economics, Kingston University London.
    3. Jungmann, Benjamin, 2021. "Growth drivers in emerging capitalist economies before and after the Global Financial Crisis," IPE Working Papers 172/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Costas Lapavitsas & Aylin Soydan, 2020. "Financialisation in developing countries: Approaches, concepts, and metrics," Working Papers 240, Department of Economics, SOAS University of London, UK.

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