Credit Booms and Macroeconomic Dynamics [electronic resource] : Stylized Facts and Lessons for Low-Income Countries / Marco Arena.
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TextSeries: IMF Working Papers; Working Paper ; No. 15/11Publication details: Washington, D.C. : International Monetary Fund, 2015Description: 1 online resource (47 p.)ISBN: 1484356861 :ISSN: 1018-5941Subject(s): Banking | Booms | Credit Boom | Credit | Emerging Market Economies | Financial Markets and the Macroeconomy | Bahrain | Bhutan | Burkina Faso | Congo, Democratic Republic of the | Guinea-BissauAdditional physical formats: Print Version:: Credit Booms and Macroeconomic Dynamics : Stylized Facts and Lessons for Low-Income CountriesOnline resources: IMF e-Library | IMF Book Store Abstract: 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.
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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