Consumption-Led Expansions

13 Pages Posted: 20 Mar 2017

See all articles by Enisse Kharroubi

Enisse Kharroubi

Bank for International Settlements (BIS)

Emanuel Kohlscheen

Bank for International Settlements (BIS)

Date Written: March 6, 2017

Abstract

GDP growth has increasingly been led by consumption. However, consumption-led expansions tend to be significantly weaker than when growth is driven by other components of aggregate demand, often because of the build-up of imbalances. We show that while factors such as credit growth and rising house prices can boost consumption in the short run, the incidence of consumption-led growth and rising debt service ratios significantly dampen growth in the medium to long run. Policies that address the build-up of imbalances and strengthen investment are therefore central to fostering durable growth.

JEL Classification: E21, E32, E50, F43, O40

Suggested Citation

Kharroubi, Enisse and Kohlscheen, Emanuel, Consumption-Led Expansions (March 6, 2017). BIS Quarterly Review, March 2017, Available at SSRN: https://ssrn.com/abstract=2931471

Enisse Kharroubi (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Emanuel Kohlscheen

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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