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The Role of Loan Dynamics and Structure for CEE Economic Growth

In: Lending, Investments and the Financial Crisis

Author

Listed:
  • Ewa Miklaszewska
  • Katarzyna Mikołajczyk

Abstract

The key responsibility of the banking sector is to provide credit to consumers, corporations and small firms. In case of firms, bank credit is an essential part of financing investment activities, particularly within the European financial model. Households use debt primarily to finance consumer spending and mortgages, but for firms an external source of finance is essential to their investments, which in the long run is fundamental to the GDP growth. However, excessive leverage can also be harmful: Cecchetti et al. (2011), using OECD data, found that corporate debt above 90 per cent of GDP and household debt above 85 per cent of GDP constitute a financial burden which may hamper a country’s economic growth. In the light of the 2007–09 financial crisis, it has become particularly important to understand how banks make loans and to establish what are the factors influencing credit structure and composition.

Suggested Citation

  • Ewa Miklaszewska & Katarzyna Mikołajczyk, 2015. "The Role of Loan Dynamics and Structure for CEE Economic Growth," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Elena Beccalli & Federica Poli (ed.), Lending, Investments and the Financial Crisis, chapter 4, pages 78-103, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-1-137-53101-8_4
    DOI: 10.1057/9781137531018_4
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