Household debt as a determinant of retail and personal consumption – the case of Croatia

^*This work has been fully supported by Croatian Science Foundation under the project 7031.

Figures & data

Table 1. The composition of personal consumption in Croatia, in selected years (in %).

Category	1998	2000	2008	2011	2014^p	2018^p	Growth rate
1. Food and non-alcoholic beverages	38.2	32.2	32.1	31.7	31.4	30.8	−19.4
2. Alcoholic beverages and tobacco	4.6	4.6	3.5	3.7	3.6	3.3	−28.3
3. Clothing and footwear	6.3	7.5	7.9	6.0	5.5	4.6	−26.9
4. Housing and energy consumption	10.8	13.3	13.8	15.7	15.9	16.2	50.0
5. Furnishing, household equipment and routine maintenance	6.3	5.9	5.4	4.6	4.5	4.4	−30.2
6. Health	1.7	1.8	2.8	2.7	3.0	3.6	111.7
7. Transport	13.4	11.0	12.0	12.9	12.9	12.8	−4.5
8. Communication	1.9	2.1	5.4	5.4	5.7	6.3	231.6
9. Recreation and culture	5.1	5.7	5.4	5.3	5.2	5.0	−1.96
10. Education	0.6	0.7	0.9	0.9	1.0	1.1	83.3
11. Restaurants and hotels	3.1	2.7	3.1	2.4	2.4	2.4	−22.5
12. Other goods and services	8.1	6.9	7.7	8.7	9.0	9.5	17.3

Note:

^p Projections by Business Monitor International (2014).

Source: Anić and Nušinović (2003), DZS (2013), Business Monitor International (2014).

Figure 1. Seasonally adjusted indices of retail turnover in Croatia (2010 = 100).

Source: Eurostat (2013), authors’ calculations.

Figure 2. The impact of the recession on total retail turnover in the European Union (the spread between the post-2008 minimum level of turnover and the pre-2008 maximum level of turnover, in index points).

Source: Eurostat, authors’ calculations.

Figure 3. Post-recession recovery of the total retail turnover index in the European Union (the spread between the 2014:M01 turnover and the minimum level of turnover during 2008–2010, in index points).

Source: Eurostat, authors’ calculations.

Figure 4. The correlation between the 2012 level of private debt (in % of GDP, x-axis) and the post-recession recovery of the total retail turnover index in the European Union (y-axis).

Source: Eurostat, authors’ calculations.

Table 2. Description of variables included in the model.

Variable	Description	Source
SALES	Seasonally adjusted deflated index of total retail turnover, excluding motor vehicles (2010 = 100)	Eurostat
SALES_FOOD	Seasonally adjusted deflated index of retail sale of food, beverages and tobacco (2010 = 100)	Eurostat
SALES_NFOOD	Seasonally adjusted deflated index of retail sale of non-food products, excluding fuel (2010 = 100)	Eurostat
GDP	Seasonally adjusted logarithm of real GDP in millions of EUR in 2000 prices, interpolated from quarterly to monthly frequencies using the monthly series of domestic industrial production in WinRATS 8 software	Eurostat, authors’ calculations
STOCKS	Croatian stock price index CROBEX (2005 = 100).	IFS
WAGE	Seasonally adjusted index of real wages (2005 = 100)	IFS, authors’ calculations
CONF	Composite index of consumer confidence	HNB
RESTATE	Hedonic index of real estate prices in Croatia, interpolated from quarterly to monthly frequencies using the monthly series of apartment prices obtained by Burza nekretnina d.o.o.^a	HNB, Burza nekretnina d.o.o., authors’ calculations
UNEMP	Seasonally adjusted unemployment rate	IFS
DEBT	Logarithm of deflated claims of banks from households, in millions of HRK	HNB, authors’ calculations

Note:

^a More detailed description of the interpolation process of variables GDP and RESTATE is available upon request.

Figure 5. Variables included in the model.

Source: IFS, Eurostat, HNB, Burza nekretnina d.o.o., authors’ calculations.

Table 3. Results of ADF tests.

Variable	t-statistics	Variable	t-statistics
SALES	−0.892	WAGE	−1.361
ΔSALES	−13.648***	ΔWAGE	−6.026***
SALES_FOOD	−1.302	CONF	−1.899
Δ SALES_FOOD	−13.507***	ΔCONF	−10.494***
SALES_NFOOD	−0.948	RESTATE	−2.211
Δ SALES_NFOOD	−12.509***	ΔRESTATE	−1.811*
GDP	−0.722	UNEMP	0.184
ΔGDP	−8.562***	ΔUNEMP	−5.806***
STOCKS	−1.426	DEBT	−0.722
ΔSTOCKS	−7.012***	ΔDEBT	−8.562***

Note:

The non-stationarity hypothesis can be rejected at.

^*** 1% level of significance.

^** 5% level of significance.

^* 10% level of significance.

Source: authors’ calculations.

Table 4. Results of the econometrically estimated equation for total retail turnover.

Dependent variable: ΔSALES
Method of estimation: OLS
Number of observations: 101 (after adjustment)
HAC standard errors and covariance
Variable	Coefficient	t-statistics	p-value
Constant	−0.035	−0.418	0.677
ΔGDP	128.46***	3.233	0.002
ΔSTOCKS	−0.017*	−1.846	0.068
ΔWAGE	0.360*	1.784	0.078
ΔCONF	0.045*	1.712	0.090
ΔRESTATE	−0.097	−1.421	0.159
ΔUNEMP	0.218	0.852	0.396
ΔDEBT	1.591	0.157	0.876
R^2	0.451	Akaike criterion	3.004
Adjusted R^2	0.410	Schwarz criterion	3.211
Standard error of regression	1.046	Hannan-Quinn criterion	3.088
f-statistics	10.926	Durbin-Watson statistics	2.480
Prob.(f-stat)	0.000

Note:

The null hypothesis of the insignificance of estimated parameters can be rejected at.

^*** 1% level of significance.

^** 5% level of significance.

^* 10% level of significance.

Source: authors’ calculations.

Table 5. Results of the econometrically estimated equation for retail turnover of food, beverages and tobacco products.

Dependent variable: ΔSALES_FOOD
Method of estimation: OLS
Number of observations: 101 (after adjustment)
HAC standard errors and covariance
Variable	Coefficient	t-statistics	p-value
Constant	−0.035	−0.300	0.765
ΔGDP	110.855***	2.935	0.004
ΔSTOCKS	−0.035*	−1.962	0.053
ΔWAGE	0.639**	2.041	0.044
ΔCONF	0.055	1.323	0.189
ΔRESTATE	0.013	0.213	0.832
ΔUNEMP	−0.161	−0.416	0.678
ΔDEBT	−0.388	−0.030	0.976
R^2	0.301	Akaike criterion	3.781
Adjusted R^2	0.249	Schwarz criterion	3.988
Standard error of regression	1.543	Hannan-Quinn criterion	3.864
f-statistics	5.733	Durbin-Watson statistics	2.531
Prob.(f-stat)	0.000

Note:

The null hypothesis of the insignificance of estimated parameters can be rejected at.

^*** 1% level of significance.

^** 5% level of significance.

^* 10% level of significance.

Source: authors’ calculations.

Table 6. Results of the econometrically estimated equation for retail turnover of non-food products.

Dependent variable: ΔSALES_NFOOD
Method of estimation: OLS
Number of observations: 94 (after adjustment)
HAC standard errors and covariance
Variable	Coefficient	t-statistics	p-value
Constant	−0.175	−1.256	0.212
ΔGDP	142.840***	4.899	0.000
ΔSTOCKS	−0.003	−0.276	0.782
ΔWAGE	−0.201	−0.510	0.610
ΔCONF	−0.014	−0.356	0.722
ΔRESTATE	−0.176	−1.428	0.156
ΔUNEMP	0.880*	1.976	0.051
ΔDEBT	29.829*	1.847	0.068
R^2	0.298	Akaike criterion	3.881
Adjusted R^2	0.232	Schwarz criterion	4.125
Standard error of regression	1.610	Hannan-Quinn criterion	3.980
f-statistics	4.514	Durbin-Watson statistics	2.477
Prob.(f-stat)	0.000

Note:

The null hypothesis of the insignificance of estimated parameters can be rejected at.

^*** 1% level of significance.

^** 5% level of significance.

^* 10% level of significance.

Source: authors’ calculations.

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