Credit booms, monetary integration and the new neoclassical synthesis
AbstractCredit to the private sector has risen rapidly in many new Central and Eastern European EU Member States (nMS) in recent years. The lending boom has recently been particularly strong in the segment of loans to households, primarily mortgage-based housing loans, and in those countries that operate currency boards or other forms of hard pegs. The main aim of this paper is to propose a conceptual framework to analyze the observed developments with a view to exploring some policy implications at a stage in which these countries are preparing for their prospective integration with the euro area. To achieve this, we first use a stylized new neoclassical synthesis (NNS) framework, which has recently been advanced by Goodfriend [Goodfriend, M., 2002. Monetary policy in the new neoclassical synthesis: A primer, Federal Reserve Bank of Richmond, July.] and Goodfriend and King [Goodfriend, M., King, R., 2001. The case for price stability. NBER Working Paper 8423]. We then discuss the implications of the NNS model for credit dynamics and ensuing monetary policy challenges. Specifically, we emphasize consumption smoothing as an important channel of the observed credit expansion and we show how it is related to and how it affects the monetary policy making in MS. In doing so, we place our discussion in the context of the monetary integration process in general and the nominal convergence process in particular.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 32 (2008)
Issue (Month): 3 (March)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marvin Goodfriend, 2004.
"Monetary policy in the new neoclassical synthesis : a primer,"
Federal Reserve Bank of Richmond, issue Sum, pages 21-45.
- Goodfriend, Marvin, 2002. "Monetary Policy in the New Neoclassical Synthesis: A Primer," International Finance, Wiley Blackwell, vol. 5(2), pages 165-91, Summer.
- Ivanna Vladkova Hollar & Giovanni Dell'Ariccia & Carlo Cottarelli, 2003.
"Early Birds, Late Risers, and Sleeping Beauties: Bank Credit Growth to the Private Sector in Central and Eastern Europe and in the Balkans,"
IMF Working Papers
03/213, International Monetary Fund.
- Cottarelli, Carlo & Dell'Ariccia, Giovanni & Vladkova-Hollar, Ivanna, 2005. "Early birds, late risers, and sleeping beauties: Bank credit growth to the private sector in Central and Eastern Europe and in the Balkans," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 83-104, January.
- Pierre-Olivier Gourinchas & Rodrigo Valdes & Oscar Landerretche, 2001.
"Lending Booms: Latin America and the World,"
NBER Working Papers
8249, National Bureau of Economic Research, Inc.
- Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000.
"Finance and the sources of growth,"
Journal of Financial Economics,
Elsevier, vol. 58(1-2), pages 261-300.
- Beck, T.H.L. & Levine, R. & Loayza, N., 2000. "Finance and the sources of growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125520, Tilburg University.
- Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
- Ceyla Pazarbasioglu & Gudrun Johnsen & Paul Louis Ceriel Hilbers & Inci Ã–tker, 2005. "Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies," IMF Working Papers 05/151, International Monetary Fund.
- Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 467-482.
- Coricelli, Fabrizio & Mucci, Fabio & Revoltella, Debora, 2006. "Household Credit in the New Europe: Lending Boom or Sustainable Growth?," CEPR Discussion Papers 5520, C.E.P.R. Discussion Papers.
- Marvin Goodfriend & Robert G. King, 2001.
"The Case for Price Stability,"
NBER Working Papers
8423, National Bureau of Economic Research, Inc.
- Jarko Fidrmuc & Caroline Klein & Robert W.R. Price & Andreas Wörgötter, 2013.
"Slovakia: A Catching Up Euro Area Member In and Out of the Crisis,"
OECD Economics Department Working Papers
1019, OECD Publishing.
- Fidrmuc, Jarko & Klein, Caroline & Price, Robert & Wörgötter, Andreas, 2013. "Slovakia: A Catching Up Euro Area Member In and Out of the Crisis," IZA Policy Papers 55, Institute for the Study of Labor (IZA).
- Büyükkarabacak, Berrak & Valev, Neven T., 2010. "The role of household and business credit in banking crises," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1247-1256, June.
- Serwa, Dobromił, 2013.
"Identifying multiple regimes in the model of credit to households,"
International Review of Economics & Finance,
Elsevier, vol. 27(C), pages 198-208.
- Dobromil Serwa, 2011. "Identifying multiple regimes in the model of credit to households," National Bank of Poland Working Papers 99, National Bank of Poland, Economic Institute.
- Christian Fahrholz & Cezary Wójcik, 2012.
"The Eurozone Needs Exit Rules,"
CESifo Working Paper Series
3845, CESifo Group Munich.
- Beltratti, Andrea & Morana, Claudio, 2010. "International house prices and macroeconomic fluctuations," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 533-545, March.
- Festic, Mejra & Kavkler, Alenka & Repina, Sebastijan, 2011. "The macroeconomic sources of systemic risk in the banking sectors of five new EU member states," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 310-322, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.