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Consumption of households in Colombia: What do the retail trade indices tell us?

Author

Listed:
  • Luis E. Arango
  • Luz A. Flórez
  • N. Johana Marín
  • Carlos E. Posada

Abstract

Using monthly information on retail trade, we study the short-term dynamics of household consumption variations in Colombia. Based on a sample of retail trade excluding fuels and vehicles, we find that the growth of household consumption can be explained by lags in the Economy Monitoring Indicator (ISE), the interest rate, consumer credit, and consumer confidence. In a Granger sense, these four variables cause the growth of household consumption. Using instrumental variables, these variables remain as fundamental drivers of household consumption growth. Consumer confidence contains different information than the ISE. We associate this information with uncertainty due to a non-financial risk, possibly linked to unemployment according to our theoretical framework. Percentage annual variations of remittances and credit card limits are also determinant while the importance of labor market outcomes to explain the household consumption vanishes as long as the above variables are considered in the empirical models, or the consumption is modeled in annual percentage variations instead of monthly or quarterly. **** RESUMEN: Utilizando información mensual de comercio al por menor, estudiamos la dinámica de corto plazo del consumo de los hogares en Colombia. Basados en la muestra de comercio al por menor sin combustibles ni vehículos, encontramos que su crecimiento se explica mediante rezagos del ISE (Indicador de Seguimiento a la Economía), la tasa de interés, el crédito al consumo y la confianza del consumidor. En el sentido de Granger, estas cuatro variables causan el crecimiento del consumo de los hogares. Utilizando variables instrumentales, dichas variables permanecen como factores fundamentales en la explicación del crecimiento del consumo de los hogares. La confianza del consumidor contiene información diferente de la que contiene el ISE; dicha información la asociamos con incertidumbre, un riesgo no financiero, posiblemente vinculado con el desempleo según nuestro marco teórico. Las variaciones porcentuales anuales de las remesas y los cupos de las tarjetas de crédito también son determinantes, mientras que la importancia de las tasas nacional y urbana de desempleo y la tasa de ocupación en la explicación del consumo de los hogares desaparece siempre que las variables anteriores se incluyan en los modelos empíricos, o el consumo se modele en variaciones porcentuales anuales en lugar de variaciones mensuales o trimestrales.

Suggested Citation

  • Luis E. Arango & Luz A. Flórez & N. Johana Marín & Carlos E. Posada, 2024. "Consumption of households in Colombia: What do the retail trade indices tell us?," Borradores de Economia 1275, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:1275
    DOI: 10.32468/be.1275
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    References listed on IDEAS

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    More about this item

    Keywords

    retail trade indices; household consumption; labor market outcomes; consumer confidence; interest rate; índices de comercio al por menor; consumo de los hogares; mercado laboral; confianza de los consumidores; tasas de interés;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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