Consumer participation in the credit market during the COVID-19 pandemic and beyond
Gepubliceerd: 12 maart 2024
Abstract This paper analyses the consumer’s decision to apply for credit and the probability of the credit being accepted in the euro area during a period characterized by the unprecedented concomitance of events and changing borrowing conditions linked to the global COVID-19 pandemic and the Russian invasion of Ukraine. We use data between 2020Q1 and 2023Q2 from the ECB’s Consumer Expectations Survey. We find that the credit demand is highest when the first lockdown ends and drops when supportive monetary compensation schemes are implemented. There is evidence that constrained households are significantly less likely to apply for credit. Credit is more likely to be accepted under favourable borrowing conditions and after the approval of national recovery plans. We also find that demographic, economic factors, perceptions and expectations are associated with the demand for credit and the credit grant.
Keywords: Consumer finance; Liquidity constraints; Credit applications; Consumer Expectations Survey
JEL codes C23; D12; D14; G51
Working paper no. 807
807 - Consumer participation in the credit market during the COVID-19 pandemic and beyond
807 - Consumer participation in the credit market during the COVID-19 pandemic and beyond
Research highlights
- We analyze household credit applications and credit acceptances using microdata from the ECB’s Consumer Expectations Survey (CES) in the six largest euro area countries from January 2020 to July 2023.
- We find that the credit demand is highest when the first lockdown due to the COVID-19 pandemic ends and drops when supportive monetary compensation schemes are implemented.
- In all countries but Italy households are significantly less likely to apply and to get their credit approved than in Germany.
- We show evidence that constrained households are significantly less likely to apply for credit, and that demographic, economic factors, perceptions and expectations are associated with the demand for credit and the credit grant.
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