Credit Supply Driven Boom-Bust Cycles

Arslan, Yavuz; Guler, Bulent; Kuruscu, Burhan

doi:10.2139/ssrn.3573994

Cited by 3 publications

(3 citation statements)

References 92 publications

(93 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Eight variables were used in the empirical analysis. These eight variables have been used in previous studies such as Owusu (2012), Balke (2000), Gilchrist and Zakrajšek (2012), Arslan et al (2021), Popov and Rocholl (2018). The dependent variable is GDP per capita (CGDP).…”

Section: Datamentioning

confidence: 99%

Effect of abnormal credit expansion and contraction on GDP per capita in ECOWAS countries

Ozili¹,

Oladipo

Iorember

2022

Economic Notes

View full text Add to dashboard Cite

We investigate the impact of abnormal credit expansion and contraction on the GDP per capita of ECOWAS countries. We analyse abnormal credit from two dimensions: first, the impact of abnormal credit contraction on GDP per capita, and second, the impact of abnormal credit expansion on GDP per capita. Using data for 10 ECOWAS countries from 1993 to 2021, we find evidence that abnormal credit contraction reduces the GDP per capita of ECOWAS countries. We also find some evidence that abnormal credit expansion reduces the GDP per capita of ECOWAS countries. More specifically, a unit increase in abnormal credit contraction decreases GDP per capita by 0.99 percent while a unit increase in abnormal credit expansion decreases GDP per capita by only 0.1 percent. The findings confirm that 'too little' or 'too much' credit does not improve economic output per person in immature financial systems. We also observe that banking sector solvency and a strong legal system have a positive effect on the GDP per capita of ECOWAS countries while banking sector efficiency has a negative effect on GDP per capita.

show abstract

Section: Datamentioning

confidence: 99%

Effect of abnormal credit expansion and contraction on GDP per capita in ECOWAS countries

Ozili¹,

Oladipo

Iorember

2022

Economic Notes

View full text Add to dashboard Cite

show abstract

“…Mian and Sufi (2019) also confirm that the credit supply conditions play a crucial role in speculative booms and busts in asset prices, which include house prices. Arslan et al (2020) present the importance of the credit supply channel during the booms, because of the higher leverage opportunities of the banking sector. The evidence suggests that the deterioration of banks´ balance sheets during a bust leads to the higher amplification of that bust.…”

Section: Literature Reviewmentioning

confidence: 99%

The Use of Borrower-based Measures within Macroprudential Policy: Evidence from the European Economic Area

Fiala¹,

Teplý²

2021

EFAJ

View full text Add to dashboard Cite

The article deals with borrower-based instruments within macroprudential policy as measures aimed at reducing systemic risk regarding household debt. Our contribution is three-fold; Firstly, we show that more than 50% of countries in the European Economic Area have incorporated the borrower-based measures into their national legal framework. Secondly, we provide evidence that in countries exceeding the average level of household debt growth, more active caps are used. Thirdly, our results confirm the use of more than one active cap in countries where the house price increase was higher than average house price growth. We also highlight the reaction of the Czech National Bank and other authorities to the COVID-19 crisis, which has resulted in the relaxing of standards.

show abstract

“…The pioneers in this area, Mian and Sufi (2014), have used regional variation to identify how the weakening of household balance sheets precipitated by the house price decline contributed to the downturn. 9 Others have focused on banks. For example, Chodorow-Reich (2014) exploits variation in bank financial health to identify how disruption in banking affected employment.…”

Section: Digging Deeper: Evidence From State Datamentioning

confidence: 99%

What Happened: Financial Factors in the Great Recession

Gertler

Gilchrist

2018

Journal of Economic Perspectives

139

View full text Add to dashboard Cite

At the onset of the recent global financial crisis, the workhorse macroeconomic models assumed frictionless financial markets. These frameworks were thus not able to anticipate the crisis, nor to analyze how the disruption of credit markets changed what initially appeared like a mild downturn into the Great Recession. Since that time, an explosion of both theoretical and empirical research has investigated how the financial crisis emerged and how it was transmitted to the real sector. The goal of this paper is to describe what we have learned from this new research and how it can be used to understand what happened during the Great Recession. In the process, we also present some new empirical work. We argue that a complete description of the Great Recession must take account of the financial distress facing both households and banks and, as the crisis unfolded, nonfinancial firms as well. Exploiting both panel data and time series methods, we analyze the contribution of the house price decline, versus the banking distress indicator, to the overall decline in employment during the Great Recession. We confirm a common finding in the literature that the household balance sheet channel is important for regional variation in employment. However, we also find that the disruption in banking was central to the overall employment contraction.

show abstract

Credit Supply Driven Boom-Bust Cycles

Cited by 3 publications

References 92 publications

Effect of abnormal credit expansion and contraction on GDP per capita in ECOWAS countries

Effect of abnormal credit expansion and contraction on GDP per capita in ECOWAS countries

The Use of Borrower-based Measures within Macroprudential Policy: Evidence from the European Economic Area

What Happened: Financial Factors in the Great Recession

Contact Info

Product

Resources

About