CAN CONSUMER CREDIT STIMULATE CONSUMER CONFIDENCE? EVIDENCE FROM THE TIME-VARYING ASPECT

This study discusses the nexus between consumer credit (CC) and consumer confidence (CF) in the case of China with a bootstrap rolling-window causality test. The new empirical results demonstrate that CC improves CF in specific periods by loosening liquidity constraints and increasing consumer power temporarily. Meanwhile, a negative link is also found, which can be explained by policy adjustment and financial instabilities. On the contrary, CF negatively influences CC in some periods, reflecting consumers' attitudes toward the future would change borrowing behaviors. But this relationship would be disrupted by government intervention and public events such as the COVID-19 pandemic. The contribution is that time-varying, multiple-directional and dynamic causalities are captured, which enriches the theoretical framework between CC and CF. Therefore, the government must design and adjust loaning policies against specific circumstances and transmit positive signs to consumers. Future study needs to pay attention to different types of CC and try to reveal their heterogeneous influences on CF. In addition, the effect evaluation for CC policy is also another focus in the next research.