Determinants of Credit to Households: An Approach Using the Life-Cycle Model
Posted: 31 Oct 2015
Date Written: 2014
This paper applies a life-cycle model with individual income uncertainty in order to investigate the determinants of credit to households. We show that the household credit to GDP ratio depends on the lending-deposit interest rate spread, individual income uncertainty, and individual income persistence. We subsequently provide empirical evidence for the prediction of a theoretical model on the basis of data from OECD and EU countries.
Keywords: Household credit, Life-cycle economies, Banking sector
JEL Classification: E21, E43, E51
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