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Missed Payments, Renegotiations, and Household Consumption

Author

Listed:
  • Kyriaki G. Louka

    (Central Bank of Cyprus and University of Cyprus, Cyprus)

  • Nektarios A. Michail

    (Central Bank of Cyprus, Cyprus)

Abstract

The paper examines how consumption habits of borrowers are affected after missing one or more payments or when their loan payments are delayed by more than 90 days. In addition, we investigate how household consumption may be impacted by successful loan restructuring. Using data from the Eurosystem Household Finance and Consumption Survey for 2017, we find that households with late or missed loan payments report a fall in consumption levels and those with loans in arrears register an increase in consumption. This suggests that a household's failure to fulfil its commitments may actually help it increase its consumption. Other determinants that affect household consumption and income disparities are also considered to be explanatory variables.

Suggested Citation

  • Kyriaki G. Louka & Nektarios A. Michail, 2022. "Missed Payments, Renegotiations, and Household Consumption," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 20(1), pages 31-50.
    • Handle: RePEc:seb:journl:v:20:y:2022:i:1:p:31-50
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    References listed on IDEAS

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    More about this item

    Keywords

    In-House/Out-of-House Consumption; HFCS; Non-Performing Loans;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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