Evolution and Importance of the Consumption Credit in Chile

Abstract

Consumer debt, both with the commercial and the financial sector, has been rising quickiy during the past decade. Both economic authorities and analysts are worried about high consumer debt growth although the roots of this preoccupation are seldom made explicit. This article attempts to identify the macroeconomic effects that high consumer debt growth may cause. Both International cross-country and Chilean time-series evidence suggest that Chilean consumer debt is not abnormally high and that its rate of growth was declining even before the start of the Asian crisis. Consumer debt is shown to the the most procyclical credit category, a finding that has implicationsfor the effectiveness of monetary policy. Finally the paper provides preliminary evidence showing that more access to credit by larger consumer groups may have had some negative effects on prívate saving.