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Credit channels and consumption in Europe: empirical evidence

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  • Gabe de Bondt

Abstract

This paper studies the macroeconomic relevance of credit channels of monetary policy by examining the impact of the external finance premium (EFP), that may vary over the business cycle, on private consumption in Europe. A consumption model incorporates credit channels by assuming that liquidity-constrained consumers not only use current income for financing their consumption, but also external finance, which availability depends on the EFP. The empirical analysis shows an accelerator effect of the EFP on consumption for Germany, Italy and the Netherlands. In contrast, for France, the United Kingdom and Belgium no evidence in favour of this financial propagation mechanism has been found.

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  • Gabe de Bondt, 1999. "Credit channels and consumption in Europe: empirical evidence," BIS Working Papers 69, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:69
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    References listed on IDEAS

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    1. Ramey, Valerie, 1993. "How important is the credit channel in the transmission of monetary policy?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 1-45, December.
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    Cited by:

    1. Ms. Meral Karasulu, 2008. "Stress Testing Household Debt in Korea," IMF Working Papers 2008/255, International Monetary Fund.
    2. de Bondt, Gabe, 2002. "Euro area corporate debt securities market: first empirical evidence," Working Paper Series 0164, European Central Bank.
    3. Gabe Jacob de Bondt & Arne Gieseck & Zivile Zekaite, 2020. "Thick modelling income and wealth effects: a forecast application to euro area private consumption," Empirical Economics, Springer, vol. 58(1), pages 257-286, January.
    4. Rinaldi, Laura & Sanchis-Arellano, Alicia, 2006. "Household debt sustainability: what explains household non-performing loans? An empirical analysis," Working Paper Series 570, European Central Bank.
    5. G.J. De Bondt, 1999. "Credit channels in Europe: a cross-country investigation," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 52(210), pages 295-326.
    6. Anna Florio, 2013. "The Implied Consumer Euler Rate: What Role for Financial Frictions?," CESifo Economic Studies, CESifo Group, vol. 59(4), pages 650-675, December.
    7. de Bondt, Gabe, 2002. "Euro area corporate debt securities market: first empirical evidence," Working Paper Series 164, European Central Bank.

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