Do Credit Shocks Matter? A Global Perspective

Author/Editor: Helbling, Thomas ; Huidrom, Raju ; Kose, M. Ayhan ; Otrok, Christopher
Publication Date: November 01, 2010
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper examines the importance of credit market shocks in driving global business cycles over the period 1988:1-2009:4. We first estimate common components in various macroeconomic and financial variables of the G-7 countries. We then evaluate the role played by credit market shocks using a series of VAR models. Our findings suggest that these shocks have been influential in driving global activity during the latest global recession. Credit shocks originating in the United States also have a significant impact on the evolution of world growth during global recessions.
Series: Working Paper No. 10/261
Subject(s): Business cycles | Capital markets | Credit | Cross country analysis | Economic models | Economic recession | External shocks | Group of seven | Time series | United States

Author's Keyword(s): Business cycles | credit spreads | macroeconomic fluctuations | global recession.
Publication Date: November 01, 2010
Format: Paper
Stock No: WPIEA2010261 Pages: 37
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