What Drives Credit Growth in Emerging Asia?
IMF Working Papers, February 1, 2012
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Bibliographic details
- Authors: Fei Han, Selim A Elekdag
- Published: February 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463936440.001
Summary
- The paper seeks to uncover the main drivers of credit growth in emerging Asia using a multi-country structural vector autoregressive (SVAR) model.
- A two-block SVAR is developed whereby shocks within blocks are identified using sign restrictions, whereas shocks across the blocks are identified using a recursive (block-) Cholesky structure.
- The authors find that domestic factors are more dominant than external factors in driving rapid credit growth in emerging Asia.
- Domestic monetary policy is highlighted as particularly pivotal for managing rapid credit growth in emerging Asia.
Methodology
- Multi-country structural vector autoregressive (SVAR) model.
- Two-block SVAR design:
- Within-block shocks identified using sign restrictions.
- Across-block shocks identified using a recursive (block-) Cholesky structure.
- Econometric approaches noted in subject/keywords: Bayesian estimation, sign restrictions, Structural vector autoregression, SVAR.
Key findings and evidence
- Domestic factors dominate external factors in driving rapid credit growth in emerging Asia.
- Domestic monetary policy can play a pivotal role in terms of managing rapid credit growth in emerging Asia.
Policy implications and recommendations
- Policymakers in emerging Asia should consider domestic monetary policy tools as central instruments to manage rapid credit growth.
- Given the dominance of domestic drivers, region-specific macroprudential and monetary measures may be more effective than relying primarily on external adjustments.