Long-run credit growth in the US

The paper explores the long-term income elasticity of consumer and mortgage credit growth since World War II. It also examines other economic factors, to determine whether recent credit use is anomalous. Two-stage least squares show consumer credit income elasticity to be slightly below 1.0, taking other factors into account. A vector autoregressive error correction (VAREC) model for cointe-grated variables with unit roots determine short-run and long-run credit impact multipliers which are consistent with the elasticities. Except for 1974-1979, the long-run consumer credit impact multiplier of 0.23 is very close to the debt-income limit that Enthoven projected as long ago as 1957. These results are very different from the simplistic media perspectives. (C) 2010 Elsevier Inc. All rights reserved.