An Anatomy of Credit Booms: Evidence From Macro Aggregates and Micro Data
September 1, 2008
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Summary
We study the characteristics of credit booms in emerging and industrial economies. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations and widening external deficits. Micro data show a strong association between credit booms and leverage ratios, firm values, and banking fragility. We also find that credit booms are larger in emerging economies, particularly in the nontradables sector; most emerging markets crises are associated with credit booms; and credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains.
Subject: Capital inflows, Credit, Credit booms, Financial crises, Sudden stops
Keywords: business cycle, credit boom, credit boom event, credit booms in Chile, credit expansion, credit issuance, credit transmission channel, credit transmission mechanisms, credit-GDP ratio, current account, dynamics of macro, private sector, WP
Pages:
50
Volume:
2008
DOI:
Issue:
226
Series:
Working Paper No. 2008/226
Stock No:
WPIEA2008226
ISBN:
9781451870848
ISSN:
1018-5941
