Key features and determinants of credit-less recoveries

Anatomy of credit-less recoveries

“…Credit booms are identi…ed as those during which the deviation of credit-to-GDP ratio relative to its trend is greater than 1.5 times its historical standard deviation and its annual growth rate exceeds 10 percent, or years during which the annual growth rate of the credit-to-GDP ratio exceeds 20 percent. Monetary expansions are computed as the change in the monetary base between its peak during the crisis and its level one year prior to the crisis 8. This result is also in line with the …ndings of Sugawara and Zalduendo (2013) and Bijsterbosch and Dahlhaus (2011) 9.…”

“…Demand-side covariates GDP growth: The inclusion of this variable aims at capturing a "bounce-back" e¤ect, as in Bijsterbosch and Dahlhaus (2011). In equation (29), negative values of this variable signal that the economy is operating below its potential, and accumulating unused capacity which …rms can absorb during the recovery phase.…”

“…The goal is to assess the overall performance of the models in predicting credit-less episodes. The analysis is carried out following two procedures similar to Bijsterbosch and Dahlhaus (2011). As a …rst step, we assesses the sensitivity of the results presented in the previous section to an alternative de…nition of credit-less recovery.…”

Can Europe recover without credit?

“…Similarly to Braun and Larrain (2005), Abiad, Dell'Ariccia andLi (2011) andBijsterbosch andDahlhaus (2011), we define the trough of the business cycle as the lowest point of the cyclical component of real GDP identified by the Hodrick-Prescott filter with smoothing parameter 6.25, which is the suggestion of Ravn and Uhlig (2002) for annual data. We only consider those troughs for which the lowest point of the cyclical component is below zero by more than its standard deviation.…”

“…Subsequent research, such as Claesens, Kose and Terrones (2009a,b), International Monetary Fund (2009), Abiad, Dell'Ariccia and Li (2011), Bijsterbosch and Dahlhaus (2011), and Coricelli and Roland (2011, has looked at various other aspects of creditless (and also with-credit) recoveries. These studies have concluded that creditless recoveries are not rare events (they account for about every fifth recovery), but growth is about a third lower (ie 4.5 percent per year on average during the first three years of the recovery, as calculated by Abiad, Dell'Ariccia and Li, 2011) than in recoveries with credit (when average growth was found to be 6.3 percent per year).…”