Effects of debt dynamics and financial literacy on consumer market behavior

Abstract

The consumption upgrading strategy and the dual circulation model position consumption as a critical driver of China's economic growth. Although the development of inclusive finance has somewhat promoted short-term consumption, challenges such as low financial literacy and rising debt burden threaten the sustainability of consumption. This study utilizes data from the 2013–2019 China Household Finance Survey, employing fixed-effect models to examine the impact of household debt on consumption. We also quantify financial literacy's role in moderating debt's influence on consumer behavior.