Private-Sector Credit in Central and Eastern Europe: New (Over)Shooting Stars?

Abstract

This paper analyses the equilibrium level of private credit to GDP in 11 Central and Eastern European countries in order to see whether the high credit growth recently observed in some of these countries led to above equilibrium private credit-to-GDP levels. We use estimation results obtained for a panel of small open OECD economies (out-of-sample sample) to derive the equilibrium credit level for a panel of transition economies (in-sample panel). We opt for this (out-of-sample) approach because the coefficient estimates for transition economies are fairly unstable. We show that there is a large amount of uncertainty to determine the equilibrium level of private credit. Yet our results indicate that a number of countries are very close or even above the estimated equilibrium levels, whereas others are still well below the equilibrium level. Comparative Economic Studies (2007) 49, 201–231. doi:10.1057/palgrave.ces.8100191

Monetary and macroprudential policy with foreign currency loans

“…As documented in Magud et al (2011), both fixed exchange regimes or high interest rate differentials increase the share of foreign currency loans. The latter finding has been confirmed in several other studies including Egert et al (2007), Rosenberg andTirpák (2009) andBrzoza-Brzezina et al (2010), and is crucial to understand how FCLs can weaken the monetary transmission. Especially the last paper deals explicitly with this problem.…”

The up-coming crisis and the banking sector in the Baltic States

“…A slowdown in economic activity and a higher balance of payment deficit is also likely to deteriorate NPL ratio growth in the Baltic States, with negative repercussions on debt repayment. The slowdown in economic activity is likely expected to accelerate the NPL ratio growth in the NMSs (Égert, Backé and Žumer 2006;Kiss et al, 2006).…”

Determinants of Credit to Households in a Life-Cycle Model

“…Since both our results and the results of Egert et al (2007) or Hofmann (2004) show that house prices have a significant impact on the value of credit to households, it seems interesting to analyze this relation within a theoretical life-cycle model with housing. Even though this kind of models have already been developed by some authors (Fernandez-Villaverde and Krueger, 2004;Hintermaier and Koeniger, 2009;Yang, 2009), the question about the impact of house prices or the minimum value of mortgage down-payment on the amount of credit in the economy is still relatively unexplored.…”