Business Cycle in Czechoslovakia Under Central Planning: Were Credit Shocks Causing it?

IMF Working Papers, November 1, 1996

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Business Cycle in Czechoslovakia Under Central Planning: Were Credit Shocks Causing it?

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Bibliographic details

• Authors: Aleš Bulíř
• Published: November 1, 1996
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451934755.001

Summary findings

• Industrial production is found to be cointegrated with various measures of bank credit during 1976-90.
• Noninvestment credits are Granger-causing industrial production.
• A feedback relation exists between investment credits and industrial production.
• Production decline (growth) seems to follow credit tightening (loosening).
• Credit shocks were only a minor part of the output decline in 1989-90.

Econometric approach and evidence

• Time period analyzed: 1976-90.
• Techniques referenced: cointegration analysis and Granger-causality tests.
• Main variables examined: industrial production, noninvestment credits, investment credits, various measures of bank credit.
• Dynamic relation: potency of credit supply shocks to industrial production changed over the sample; evidence of both causation (noninvestment credits → industrial production) and feedback (investment credits ↔ industrial production).

Interpretation and implications

• The "credit view" receives empirical support insofar as credit tightening is followed by production declines and credit loosening is followed by production growth.
• Despite the credit–production links, credit shocks account for only a small portion of the sharp output decline observed in 1989-90, implying other factors were predominant in that episode.

Publication and metadata

• Author: Ales Bulir
• Date: November 1, 1996
• Series: Working Paper No. 1996/129
• Issue: 129
• Volume: 1996
• Pages: 28
• DOI: https://doi.org/10.5089/9781451934755.001
• Stock No: WPIEA1291996
• ISBN: 9781451934755
• ISSN: 1018-5941
• Subjects/keywords: Bank credit; Business cycles; Credit; Econometric analysis; Economic growth; Industrial production; Money; Production; Vector autoregression; credit shock; credit supply; credits Granger-causing; investment credit; supply effect; WP

Source: IMF Working Paper — "Business Cycle in Czechoslovakia Under Central Planning: Were Credit Shocks Causing it?" by Ales Bulir, Working Paper No. 1996/129 (November 1, 1996).