Credit Cycles, Credit Risk and Countercyclical Loan Provisions
AbstractIn this paper we investigate the impact of rapid credit growth on ex ante credit risk. We present micro-econometric evidence of the positive relationship between rapid credit growth and deterioration in lending portfolios: Loans granted during boom periods have higher probability of default than those granted during periods of slow credit growth. In addition, given their importance for macroprudential policy, we evaluate the effectiveness of the implementation of the countercyclical loan provisions. We find a negative relationship between the amplitude of credit cycles and this kind of macroprudential tool.
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Bibliographic InfoPaper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 788.
Date of creation: Nov 2013
Date of revision:
Ex ante credit risk; credit cycles; countercyclical provisioning. Classification JEL:E32; E51; E60; G18; G21;
Find related papers by JEL classification:
- cou - - - - - -
- pro - - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
- JEL - Labor and Demographic Economics - - - - -
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-16 (All new papers)
- NEP-BAN-2013-11-16 (Banking)
- NEP-MAC-2013-11-16 (Macroeconomics)
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