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Title:Credit constraints and consumer spending PDF Logo
Authors:Beaton, Kimberly
Issue Date:2009
Series/Report no.:Bank of Canada Working Paper 2009,25
Abstract:This paper examines the relationship between aggregate consumer spending and credit availability in the United States. The author finds that consumer spending falls (rises) in response to a reduction (increase) in credit availability. Moreover, she provides a formal assessment of the possibility that credit availability is particularly important for consumer spending when it undergoes large changes. In this respect, she estimates a consumption function in which only large expansions and contractions in credit affect spending. She concludes that large changes in credit availability are particularly important for consumers' spending decisions. As should be expected, these periods tend to be associated with periods of high economic uncertainty. These results show that credit availability should be taken into account when modeling and forecasting consumer spending.
Subjects:Credit and credit aggregates
Domestic demand and components
Recent economic and financial developments
Document Type:Working Paper
Appears in Collections:Bank of Canada Working Papers

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