Credit supply shocks and household consumption in Russia

The paper presents a comparative analysis of the reaction of different consumer groups to the bank credit supply shocks. As parameters of consumer heterogeneity, we consider differences (i) in the form of home ownership (households with and without mortgages and tenants) and (ii) in the form of credit (households with large debt (mortgages, car loans), households with small (consumer) credit and without loans). For empirical analysis we use RLMS-HSE longitudinal Household Panel Survey for the period from 2006 to 2019, which covers two episodes of the credit crisis and post-crisis recovery. Bank credit supply shocks are estimated using the standard structural vector autoregression (SVAR) model, which also identifies aggregate supply and demand shocks and monetary policy shocks. Our results show that with a positive credit supply shock, which is equivalent to a 0.5 percentage point reduction in the interest rate on loans, households with mortgages increase their consumption by 2.1-2.5% more than households without mortgages. The observed effect is significant, since the average annual growth rate of consumption of households with mortgages in our sample is 3.8%. Our results indicate that the Bank of Russia's macroprudential policy, which uses countercyclical capital buffers (Basel III) as a tool, can be very effective in smoothing the consumption of households with mortgage debt.