Excessive Credit Growth as an Indicator of Financial (In)Stability and its Use in Macroprudential Policy
In: CNB Financial Stability Report 2010/2011
AbstractExcessive credit growth is often considered to be an indicator of future problems in the financial sector. This article examines the issue of how best to determine whether the observed level of private sector credit is excessive in the context of the â€œcountercyclical capital bufferâ€, a macroprudential tool proposed by the Basel Committee on Banking Supervision. An empirical analysis of selected Central and Eastern European countries, including the Czech Republic, provides alternative estimates of excessive private credit and shows that the HP filter calculation proposed by the Basel Committee is not necessarily a suitable indicator of excessive credit growth for converging countries.
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This chapter was published in: Adam Gersl & Jakub Seidler CNB Financial Stability Report 2010/2011, , chapter Thematic Article 2, pages 112-122, 2011.
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