Convergence in household credit demand across euro area countries: evidence from panel data

This article contributes to the literature on the convergence of financial systems in the euro area by estimating household credit demand in individual countries. Using the ARDL framework advocated notably by Pesaran et al. (1999 Pesaran, MH, Shin, Y and Smith, RP. 1999. Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94: 621–34. Taylor & Francis Online], Web of Science ®] , Google Scholar]), the article provides evidence on the convergence of long-run credit demand determinants (interest rates, investment and house prices) in the largest euro area countries, while short run-dynamics remain heterogenous across countries. The article also demonstrates that the equation uncovers demand rather than supply behaviour.