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Credit Booms and Macroeconomic Dynamics: Stylized Facts and Lessons for Low-Income Countries
Author:
Mr. Marco Arena
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,
Serpil Bouza
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,
Ms. Era Dabla-Norris
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,
Mrs. Kerstin Gerling
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, and
Lamin Njie
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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 011
Language:
English
Publication Date:
22 Jan 2015
DOI:
https://doi.org/10.5089/9781484356869.001
ISBN:
9781484356869
ISSN:
1018-5941
Pages:
47
Keywords:
WP; credit boom; boom episode; credit-to-GDP; banking; Credit booms; macroeocnomic dynamics; low-income countries; emerging market economies; credit growth; credit percapita; analysis of credit boom; characteristics of credit boom; percentage of credit boom; growth rate; probability of credit boom episode; end of the credit boom; boom magnitude; probability of a credit boom; Capital inflows; Credit; Banking crises; Monetary expansion; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Using a comprehensive database on bank credit, covering 135 developing countries over the period 1960–2011, we identify, document, and compare the macro-economic dynamics of credit booms across low- and middle-income countries. The results suggest that while the duration and magnitude of credit booms is similar across country groups, macro-economic dynamics differ somewhat in low-income countries. We further find that surges in capital inflows are associated with credit booms. Moreover, credit booms associated with banking crises exhibit distinct macroeconomic dynamics, while also reflecting a potentially large deviation of credit from country fundamentals. These results suggest that low-income countries should remain mindful of the inter-linkages between financial liberalization, increased cross-border banking activities, and rapid credit growth.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund