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Credit Crisis in View of Return on Loan

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  • Luboš Smrčka
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    Abstract

    The paper sums up various data from the Czech economy concerning the issue of the current so-called credit crisis, i.e. the situation when financial institutions are lending money to businesses only with a considerable amount of distrust and much more prudence than in the past. Based on specific figures, the author proves that the banks' unwillingness to lend stems especially from the state of demand in the local economy and among foreign customers, and from the fact that the ratio of default loans to the total number of loans has been increasing in the long term, threatening the stability of banks. Apart form other issues, however, the author sees as the key factor the decreasing gross value added to one crown of credit provided to businesses. Moreover, on the figures from the Czech Statistical Office, he proves that this process had started even before the outbreak of the crisis of 2007 to 2010. In conclusion, he considers the irresponsible growth of costs in businesses and investment into projects with poor return to be decisive reasons for the drop in gross value added.

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    Bibliographic Info

    Article provided by University of Economics, Prague in its journal Ekonomika a Management.

    Volume (Year): 2010 (2010)
    Issue (Month): 2 ()
    Pages:

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    Handle: RePEc:prg:jnleam:v:2010:y:2010:i:2:id:93

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    Related research

    Keywords: úvěrová krize; hrubá přidaná hodnota; banky; Credit crisis; Gross value added; Banks;

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    References

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    1. Dimitrios P Tsomocos & Charles A.E. Goodhart, 2004. "A Model to Analyse Financial Fragility: Applications," Economics Series Working Papers 2004-FE-05, University of Oxford, Department of Economics.
    2. Dimitrios P Tsomocos & Charles A.E. Goodhart, 2003. "A Model to Analyse Financial Fragility," Economics Series Working Papers 2003-FE-13, University of Oxford, Department of Economics.
    3. Dimitrios P Tsomocos, 2000. "Equilibrium Analysis, Banking and Financial Instability," Economics Series Working Papers 2003-FE-08, University of Oxford, Department of Economics.
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