Using Credit Subsidies to Counteract a Credit Bust: Evidence From Serbia
IMF Working Papers, December 1, 2011
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- Using Credit Subsidies to Counteract a Credit Bust: Evidence From Serbia
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Bibliographic details
- Authors: Jiri Podpiera
- Published: December 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463927196.001
Summary
- Emerging markets are particularly vulnerable to boom-bust credit cycles, due to excessive capital flows, shallow equity markets, and companies' high leverage and open FX positions.
- The policy debate on how to respond to boom-bust credit cycles remains unsettled; it has been conjectured that credit subsidies may provide a particularly effective policy tool to counter a credit bust.
- This paper reports on a rare policy experiment where credit subsidies were used to buffer the impact of the global financial crisis on Serbia in 2009.
- Model simulations suggest that credit subsidies in Serbia helped to mitigate the slump in output.
Context and scope
- Geographic focus: Serbia (policy experiment in 2009).
- Policy instrument examined: credit subsidies as a countercyclical tool during a credit bust.
- Economic vulnerabilities highlighted: excessive capital flows, shallow equity markets, companies' high leverage, and open FX positions.
Findings and evidence
- The paper documents a rare policy experiment in which credit subsidies were deployed in Serbia during the global financial crisis in 2009.
- Model simulations indicate that these credit subsidies helped to mitigate the slump in output.
Policy implications
- Credit subsidies are presented as a potentially effective tool to counteract a credit bust in emerging market contexts characterized by the vulnerabilities listed above.
- The analysis contributes evidence to the unsettled policy debate on countercyclical responses to boom-bust credit cycles.
Subjects and keywords
- Subject: Credit, Currencies, Exchange rates, Expenditure, Financial institutions, Foreign exchange, Government subsidies, Loans, Money
- Keywords: beneficiary company, cash flows, company, Countercyclical Policy, Credit, Credit Subsidy, Currencies, Exchange rates, Financial Accelerator, forces company, Global, Government subsidies, impacts companies' cash flows, Loans, number of company, overleveraged company, WP
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.
Source: Using Credit Subsidies to Counteract a Credit Bust: Evidence From Serbia (IMF Working Papers, December 1, 2011). https://www.imf.org/en/publications/wp/issues/2016/12/31/using-credit-subsidies-to-counteract-a-credit-bust-evidence-from-serbia-25408