Credit Cyclicality in Chile: A Cross-Country Analysis

Author/Editor:

Ludvig Söderling

Publication Date:

March 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper analyzes the determinants of credit cyclicality. It constructs a financial development index and studies whether it affects the amplitude of impulse responses to shocks to output, terms of trade, global liquidity, and global risk appetite. The paper uses both country-specific VARs for cross-country analyses and panel VARs to compare impulse responses between various country groupings. The study finds evidence that financial development-especially stronger creditor rights-can mitigate credit cyclicality, given that the response of credit to output or terms of trade shocks is stronger in countries with weaker financial systems.

Series:

Working Paper No. 2008/055

Subject:

Consumer credit Credit Financial frictions Financial sector development Terms of trade

English

Publication Date:

March 1, 2008

ISBN/ISSN:

9781451869170/1018-5941

Stock No:

WPIEA2008055

Pages:

21

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