The Effects of Changes in Local-Bank Health on Household Consumption
50 Pages Posted: 5 Oct 2018 Last revised: 21 Feb 2019
Date Written: 2018-10-01
Focusing on localized measures of bank health and economic activity, and renters as well as homeowners, this paper uses an innovative approach to identifying households likely in need of credit to investigate the effect on household spending of a deterioration in local-bank health. The analysis shows that local-bank health tends to impact the expenditures of renters more than homeowners, with the strongest effects for households that likely need creditâ€”those experiencing a negative income shock and having limited liquid wealth. These findings contribute to the discussion of the linkages between the financial sector and real economic activity.
Keywords: consumption, local-bank health, credit constraints
JEL Classification: E21, G21
Suggested Citation: Suggested Citation