Working Paper: CEPR ID: DP7400
Authors: Thorsten Beck; Berrak Bykkarabacak; Felix Rioja; Neven Valev
Abstract: While theory predicts different effects of household credit and enterprise credit on the economy, the empirical literature has mainly used aggregate measures of overall bank lending to the private sector. We construct a new dataset from 45 developed and developing countries, decomposing bank lending into lending to enterprises and lending to households and assess the different effects of these two components on real sector outcomes. We find that: 1) enterprise credit raises economic growth whereas household credit has no effect; 2) enterprise credit reduces income inequality whereas household credit has no effect; and 3) household credit is negatively associated with excess consumption sensitivity, while there is no relationship between enterprise credit and excess consumption sensitivity.
Keywords: financial intermediation; firm credit; household credit
JEL Codes: D14; G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| enterprise credit (G21) | GDP per capita growth (O49) |
| household credit (G51) | GDP per capita growth (O49) |
| enterprise credit (G21) | income inequality (D31) |
| household credit (G51) | income inequality (D31) |
| household credit (G51) | excess consumption sensitivity (D12) |