Who gets the credit? And does it matter? Household vs firm lending across countries

T.H.L. Beck, B. Büyükkarabacak, F. Rioja, N. Valev

Research output: Contribution to journalArticleScientificpeer-review

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 is positively associated with economic growth whereas household credit is not; and 2) enterprise credit is significantly associated with faster reductions in income inequality whereas household credit is not. We also find that the share of household credit is higher in more urban societies, in countries with smaller manufacturing sectors and more market-based financial systems, while market structure and regulatory policies are not related to credit composition.
Original languageEnglish
JournalB.E. Journal of Macroeconomics
Volume12
Issue number1
Publication statusPublished - 2012

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Household
Lending
Credit
Bank lending
Regulatory policy
Real sector
Developing countries
Manufacturing sector
Private sector
Financial system
Economic growth
Market structure
Income inequality
Developed countries

Cite this

Beck, T. H. L., Büyükkarabacak, B., Rioja, F., & Valev, N. (2012). Who gets the credit? And does it matter? Household vs firm lending across countries. B.E. Journal of Macroeconomics, 12(1).
Beck, T.H.L. ; Büyükkarabacak, B. ; Rioja, F. ; Valev, N. / Who gets the credit? And does it matter? Household vs firm lending across countries. In: B.E. Journal of Macroeconomics. 2012 ; Vol. 12, No. 1.
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Beck, THL, Büyükkarabacak, B, Rioja, F & Valev, N 2012, 'Who gets the credit? And does it matter? Household vs firm lending across countries', B.E. Journal of Macroeconomics, vol. 12, no. 1.

Who gets the credit? And does it matter? Household vs firm lending across countries. / Beck, T.H.L.; Büyükkarabacak, B.; Rioja, F.; Valev, N.

In: B.E. Journal of Macroeconomics, Vol. 12, No. 1, 2012.

Research output: Contribution to journalArticleScientificpeer-review

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N1 - Appeared earlier as CentER Discussion Paper 2009-041

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AB - 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 is positively associated with economic growth whereas household credit is not; and 2) enterprise credit is significantly associated with faster reductions in income inequality whereas household credit is not. We also find that the share of household credit is higher in more urban societies, in countries with smaller manufacturing sectors and more market-based financial systems, while market structure and regulatory policies are not related to credit composition.

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