THE DEMAND FOR CONSUMER CREDIT: IT’S RESPONSE TO ECONOMIC CONDITIONS IN CANADA

While previous analysis of the consumer credit market have allowed for a rationing of funds between potential borrowers by means of models reflecting the retail market for funds, this paper examines the consumer credit market from the perspective of the derived demand for funds by the financial institutions who supply consumer credit. It is found that the real cost of credit and the price of durable goods are the most important variables in determining the demand for consumer credit. The empirical results also indicate that an increase in the growth rate of real government debt held by the public will cause a crowding out effect on consumer credit of approximately 6% of the increase in the real value of the debt.