Does Household Borrowing Reduce the Trade Balance? Evidence from Developing and Developed Countries

Can Xu*, Jan P. A. M. Jacobs, Jakob de Haan

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

We examine the dynamic impact of household borrowing on the trade balance using data from 32 developing countries and 36 developed countries over the 1980-2020 period. Our findings suggest that the impact of household borrowing on the trade balance is negative, both in the short and long run, but the effects are more pronounced in developing countries. Moreover, we find that for developing countries the negative effect of household borrowing on the trade balance is achieved via boosting imports. In developed countries, household borrowing stimulates both imports and exports, where the effect on imports is larger.
Original languageEnglish
Pages (from-to)759–787
Number of pages29
JournalOpen Economies Review
Volume34
DOIs
Publication statusPublished - Sept-2023

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