Credit Reversals

Author/Editor:

Francisco F. Vazquez

Publication Date:

April 23, 2021

Electronic Access:

Free Download. 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:

This paper studies episodes in which aggregate bank credit contracts alongside expanding economic activity—credit reversals. Using data for 179 countries during 1960‒2017, the paper finds that reversals are a relatively common phenomenon--on average, they occur every five years. By comparison, banking crises take place every eight years on average. Credit reversals and banking crises also appear related to each other: reversals become more likely in the aftermath of banking crises, while the likelihood of crises drops following reversals. In terms of foregone economic activity, reversals are shown to be very costly, at about two-thirds of the costs of banking crises after taking into account their relative frequencies.

Series:

Working Paper No. 2021/103

Frequency:

regular

English

Publication Date:

April 23, 2021

ISBN/ISSN:

9781513582641/1018-5941

Stock No:

WPIEA2021103

Pages:

34

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