The Relationship Between Consumer Lending and Economic Growth

For centuries economists have attempted to explain what causes the ebb and flow of the economy. None thus far have been able to perfectly explain the nuances of the economy as a whole. In this paper, I explore the relationship between consumer lending volume and economic growth. Consumer lending is defined as credit card debt, motor vehicle loans, and student loans taken on by individuals. Mortgages are excluded from the data as they are considered significantly different from the other mentioned forms of consumer lending. Economic growth is defined as the change in Gross Domestic Product (GDP)/capita. I have selected four countries to examine: The United States of America (USA), The United Kingdom (UK), Australia, and Japan. I use multivariate regression analysis to determine the relationship between consumer lending and economic growth in the identified nations. My findings establish a statistically significant contemporaneous and lead-lag relationship between consumer lending and GDP/capita growth. The results for each nation researched vary drastically and are discussed in detail within the paper