Lending Standards and Output Growth

Author/Editor:

Divya Kirti

Publication Date:

January 26, 2018

Electronic Access:

Free Full Text. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

While some credit booms are followed by economic underperformance, many are not. Can lending standards help separate good credit booms from bad credit booms contemporaneously? To observe lending standards internationally, I use information from primary debt capital markets. I construct the high-yield (HY) share of bond issuance for a panel of 38 countries. The HY share is procyclical, suggesting that lending standards in bond markets are extrapolative. Credit booms with deteriorating lending standards (rising HY share) are followed by lower GDP growth in the subsequent three to four years. Such booms deserve attention from policy makers.

Series:

Working Paper No. 18/23

English

Publication Date:

January 26, 2018

ISBN/ISSN:

9781484339671/1018-5941

Stock No:

WPIEA2018023

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

76

Please address any questions about this title to publications@imf.org