Macroeconomic determinants of private credit in EU member states: evidence from a 27-country panel

Purpose – This study examines the macroeconomic determinants of private credit in European Union (EU) member states, focusing on interest rates, inflation, unemployment, household income and expenditure, and housing prices. It aims to identify key drivers of household borrowing and assess how macroeconomic conditions shape credit dynamics across the EU. Research methodology – The analysis covers 27 EU countries over the period 2001–2023 and applies panel-data econometric techniques, including ordinary least squares, fixed-effects, and random-effects models, to examine linear and nonlinear relationships. Findings – The results show that interest rates exert the strongest negative effect on private credit volumes. The gap between household expenditure and income is positively and significantly associated with household debt, indicating increased reliance on borrowing when consumption growth outpaces income growth. By contrast, housing prices, unemployment, and the nonlinear effects of the expenditure-income gap are not statistically significant. Research limitations – Data availability limits the scope of cross-country comparison. Practical implications – Policymakers should prioritise interest rate management, income growth, and labour market stability to support sustainable household indebtedness. Originality/Value – The study complements existing research by incorporating the expenditure-income gap as an additional perspective on household borrowing in the EU.