Household Credit as Stimulus? Evidence from Brazil

52 Pages Posted: 1 Nov 2021

See all articles by Gabriel Garber

Gabriel Garber

Government of the Federative Republic of Brazil - Central Bank of Brazil

Atif R. Mian

Princeton University - Department of Economics; Princeton University - Princeton School of Public and International Affairs; NBER

Jacopo Ponticelli

Northwestern University - Kellogg School of Management

Amir Sufi

University of Chicago - Booth School of Business; NBER

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Date Written: October 26, 2021

Abstract

From 2011 to 2014, the Brazilian government conducted a heavily advertised major credit expansion program through government banks as part of its effort to stimulate the economy. Using administrative data on individual-level borrowing and spending, we find that the program led to a substantial rise in borrowing by government employees, especially those with low financial literacy. We trace the impact of credit stimulus on borrowers’ consumption through the 2011-16 business cycle, and find that the credit stimulus resulted in higher consumption volatility and lower average consumption over the cycle. Our results suggest a potential downside of using household credit as stimulus in emerging markets.

JEL Classification: D12,D14,E21,E32,G21,G28,G53,O16

Suggested Citation

Garber, Gabriel and Mian, Atif R. and Ponticelli, Jacopo and Sufi, Amir, Household Credit as Stimulus? Evidence from Brazil (October 26, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-125, Available at SSRN: https://ssrn.com/abstract=3950672 or http://dx.doi.org/10.2139/ssrn.3950672

Gabriel Garber

Government of the Federative Republic of Brazil - Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70074-900
Brazil

Atif R. Mian

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jacopo Ponticelli

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Amir Sufi (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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