Does Supply or Demand Drive the Credit Cycle? Evidence from Central, Eastern, and Southeastern Europe
IMF Working Papers, January 23, 2015
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- Does Supply or Demand Drive the Credit Cycle? Evidence from Central, Eastern, and Southeastern Europe
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Bibliographic details
- Authors: Greetje Everaert, Natasha X Che, Nan Geng, Bertrand Gruss, Gregorio Impavido, Miss Yinqiu Lu, Christian Saborowski, Jerome Vandenbussche, Li Zeng
- Published: January 23, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484379981.001
Overview and research question
- Examines whether demand or supply factors explain the CESEE credit boom-bust cycle in the last decade.
- Methodology:
- Panel analysis using a large sample of bank-level data on credit growth for the entire CESEE region.
- Five country case studies: Latvia, Lithuania, Montenegro, Poland, and Romania.
Key findings
- Panel results:
- Supply factors, on average and relative to demand factors, gained in importance in explaining credit growth in the post-crisis period.
- Case study results:
- Lithuania: evidence consistent with supply factors gaining importance post-crisis.
- Montenegro: evidence consistent with supply factors gaining importance post-crisis.
- Latvia, Poland, Romania: country experiences were heterogeneous and do not uniformly mirror the panel-average result.
Policy-relevant implications (as presented)
- The relative rise in the importance of supply factors post-crisis suggests policy attention to banking-sector health, funding conditions, and bank-level constraints when addressing credit slowdowns or recoveries.
- Heterogeneity across countries implies that country-specific diagnostics are necessary before prescribing credit-policy measures.
Subjects and keywords
- Subject: Bank credit, Banking, Consumer credit, Credit, Credit booms, Financial institutions, Loans, Money
- Keywords: asset quality, Baltics, bank characteristic, Bank credit, bank funding, Consumer credit, Credit, Credit booms, credit demand, credit growth, credit supply, credit to household, demand and supply, demand and supply factor, demand development, Disequilibrium Model, Eastern Europe, excess demand, excess supply, Global, Loans, parent bank, WP
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