Credit Growth and Bank Soundness : Fast and Furious?

Author/Editor:

Deniz O Igan ; Marcelo Pinheiro

Publication Date:

December 1, 2011

Electronic Access:

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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:

We examine the risks to bank soundness associated with credit booms in a large set of countries. Using bank-level data in 90 countries between 1995 and 2005, we analyze the relationship between credit growth and bank soundness taking into account the potential two-way causality. We find that, while sounder banks tend to grow faster at moderate-growth periods, credit growth becomes less dependent on soundness during booms. These findings shed some light on why credit booms are often associated with financial crises.

Series:

Working Paper No. 11/278

Subject:

English

Publication Date:

December 1, 2011

ISBN/ISSN:

9781463925956/1018-5941

Stock No:

WPIEA2011278

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

27

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