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Is There a Pervasive World Real Credit Cycle?

Author

Listed:
  • Vítor Castro

    (Loughborough University
    University of Minho)

  • Pedro A. Cerqueira

    (University of Coimbra)

  • Rodrigo Martins

    (University of Coimbra)

Abstract

This paper analyses the international structure of credit and the potential buildup of a single world cycle using quarterly data for 48 economies between 1985 and 2015. For this analysis, we rely on an approximate factor model and on hard and fuzzy clustering methodologies. The results indicate that, for the whole sample, there are three common components to credit, one of these more pervasive and impacting most countries in the sample, particularly developed ones. One major cluster of countries is identified, but without the presence of both Japan and Germany, thus suggesting that a world real credit cycle is not yet formed. However, we found that the composition of this core cluster has been growing over the years, encompassing more countries and establishing a growing dominance over the credit cycles dynamic, opening the possibility for a single world credit cycle in the future.

Suggested Citation

  • Vítor Castro & Pedro A. Cerqueira & Rodrigo Martins, 2024. "Is There a Pervasive World Real Credit Cycle?," Open Economies Review, Springer, vol. 35(1), pages 99-119, February.
    • Handle: RePEc:kap:openec:v:35:y:2024:i:1:d:10.1007_s11079-023-09719-4
    DOI: 10.1007/s11079-023-09719-4
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    References listed on IDEAS

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    More about this item

    Keywords

    Real credit cycles; Approximate factor models; Common components; Clusters;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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