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A Tale Of Two Cycles In Developing And Advanced Economies: A Country Case Study Comparison

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  • Percic Stanislav

    ()
    (Alexandru Ioan Cuza University of Iasi, 0)

  • Apostoaie Constantin-Marius

    ()
    (Alexandru Ioan Cuza University of Iasi,)

  • Chirlesan Dan

    ()

Abstract

This research aims at performing an econometric analysis on the credit cycle and business cycle from a comparative perspective, with a focus on ten developing and advanced economies from the area of Central, Eastern and South-Eastern Europe, in order to better understand their behaviour and the impact of the interactions between them. To achieve this aim, the study focuses on two strategic objectives: a) on the one hand, it analyzes the short-term dynamics (from one quarter to the other) of the relationships between credit expansion and economic growth in order to better grasp which variable influences the other; and b) on the other hand, the research investigates the cyclical components of the data sets (after extracting them from the real GDP and the total volume of credits given by the banking system to the non-governmental sector), i.e. it performs statistical analysis on the medium-term relationships between the business cycle and the credit cycle for each of the ten European economies. The findings revealed in the first phase of the investigation that we cannot speak of a relation of unidirectional causality between credit expansion and economic growth across countries (not even across geographical regions). In Bulgaria, Latvia, Lithuania and Slovenia, economic growth had an important influence over the crediting activity, thus “guiding†it, whereas in the case of Poland, Romania and Slovakia, Granger-type causality relations were registered from the crediting expansion process towards economic growth. The second part of the investigation revealed that sometimes the credit cycle seems to be independent from the business cycle, manifesting an amplitude, a synchronicity and a volatility that is different from and superior to that of business cycle in all the analyzed countries (“having a mind of its ownâ€). Moreover, there is evidence of important spill-over effects of the credit activity across banking systems at national and regional level thus confirming the international feature of the credit cycle.

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Bibliographic Info

Article provided by University of Oradea, Faculty of Economics in its journal The Journal of the Faculty of Economics - Economic.

Volume (Year): 1 (2013)
Issue (Month): 2 (December)
Pages: 440-450

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Handle: RePEc:ora:journl:v:1:y:2013:i:2:p:440-450

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Keywords: credit cycle; business cycle; unidirectional causality; amplitude; synchronicity;

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  1. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(4), pages 27-48, Fall.
  2. Michael B. Devereux & James Yetman, 2010. "Leverage Constraints and the International Transmission of Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 42(s1), pages 71-105, 09.
  3. Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
  4. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile, Central Bank of Chile 56, Central Bank of Chile.
  5. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  6. Gertler, Mark & Kiyotaki, Nobuhiro, 2010. "Financial Intermediation and Credit Policy in Business Cycle Analysis," Handbook of Monetary Economics, Elsevier, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 11, pages 547-599 Elsevier.
  7. Chen, Nan-Kuang, 2001. "Bank net worth, asset prices and economic activity," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(2), pages 415-436, October.
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