Who participates in the credit market during the COVID-19 pandemic?
Published: 20 December 2022
By: Evangelos Charalambakis Federica Teppa Athanasios Tsiortas
This paper provides new evidence on what determines the probability of the consumer’s decision to apply for credit as well as the probability of the consumer credit being accepted by financial institutions during the COVID-19 pandemic. The empirical analysis is based on microdata collected between April 2020 and January 2022 as part of the ECB Consumer Expectations Survey, a new online survey panel of Euro area consumers. We find that age, financial literacy, unemployment and degree of urbanization significantly affect both the application and the acceptance of credit, albeit in the opposite direction. We also document that the probability for credit application increases whereas the probability of credit approval decreases during the COVID-19 outbreak. Finally, we find that there is heterogeneity in the type of credit, particularly between secured and unsecured loans.
Keywords: Consumer debt; Liquidity constraints; COVID-19 pandemic; Consumer Expectations Survey
JEL codes C23; D12; D14; G51
Working paper no. 759
759 - Who participates in the credit market during the COVID-19 pandemic?
Research highlights
- This paper focuses on the drivers of household credit applications and credit acceptances during the COVID-19 pandemic.
- The empirical analysis is based on microdata collected between April 2020 and January 2022 as part of the ECB Consumer Expectations Survey, a new online survey panel of Euro area consumers.
- We find that age and financial literacy decreases the probability to apply for a loan, whereas unemployment and degree of urbanization significantly increases that probability.
- We also document that the probability for credit application increases whereas the probability of credit approval decreases during the COVID-19 outbreak.
- Looking at specific credit applications, we provide unique evidence that unemployed consumers are discouraged from applying for mortgage loans whereas middle-income consumers are more likely to apply for consumer credit.
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