Credit to private sector, household debt and economic growth: An empirical investigation of EU countries

• Dimitrios Asteriou ^[1] ; Konstantinos Spanos
  1. [1] Oxford Brookes University

     Oxford Brookes University

     Oxford District, Reino Unido

     
• Localización: Economics and Business Letters, ISSN-e 2254-4380, Vol. 11, Nº. 4, 2022, págs. 134-142
• Idioma: inglés
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• Resumen

  • This paper investigates how the credit to private sector affects the impact of household debt on economic growth in 25 European Union countries over the period 1995-2018. The findings reveal that the positive effect of household debt on economic growth turns to negative with the onset of the 2008 global financial crisis (GFC) and beyond a certain point at around 58% of GDP, thus suggesting that their relationship is non-linear. Interestingly, the adverse effect subjects to the increased pressure of the credit to private sector when it is above 70%, and the pressure becomes even higher when the ratio is above 90%.