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Credit Shocks and Macroeconomic Fluctuations in Emerging Markets

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  • Houssa Romain
  • Jolan Mohimont
  • Chris Otrok

Abstract

In this paper, we examine the role of global and domestic credit supply shocks in macroeconomic fluctuations for Emerging Markets. For this purpose, we impose a set of zero and sign restrictions within a medium-scale Bayesian Vector Auto-Regressive model. Quarterly data from South Africa and G-7 countries in 1985-2010 show that credit supply shocks impact significantly on macroeconomic aggregates in these economies. However, credit supply shocks have played, on average, a less important role than credit demand shocks. Moreover, shocks originating from G7-countries are the main drivers of real activity in South Africa, although they played a marginal role in the 1996-1999 South African recession.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-06/cesifo1_wp4281.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4281.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4281

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Related research

Keywords: credit shocks; developing countries; macroeconomic stabilization policies; sign restrictions; Bayesian VAR;

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  16. Wai-Mun Chia & Joseph D. Alba, 2006. "Terms-of-Trade Shocks and Exchange Rate Regimes in a Small Open Economy," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages S41-S53, 09.
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