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The Interdependence between Credit and Real Business Cycles in Latin American Economies

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Listed:
  • José Eduardo Gómez
  • Jair Ojeda Joya
  • Fernando Tenjo Galarza
  • Héctor Manuel Zárate Solano

Abstract

In this document we estimate credit and GDP cycles for three Latin-American economies and study their relation in the time and frequency domains. Cycles are estimated in order to analyze their medium and short-term frequencies. We find that short-term cycles are usually more volatile than medium-term cycles for credit and GDP in Chile, Colombia and Peru. We also find that credit-cycle peaks in the middle 1990s and middle 2000s precede notable GDP recessions 2 or 3 years later in these countries. Additionally, credit cycles in Latin-American economies tend to cause later movements in economic activity. This effect can be decomposed into two components: first, a negative effect in the case of business-cycle frequencies, and a positive effect in the case of medium-term GDP fluctuations.

Suggested Citation

  • José Eduardo Gómez & Jair Ojeda Joya & Fernando Tenjo Galarza & Héctor Manuel Zárate Solano, 2013. "The Interdependence between Credit and Real Business Cycles in Latin American Economies," Borradores de Economia 10833, Banco de la Republica.
    • Handle: RePEc:col:000094:010833
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    Cited by:

    1. Fernando Arias Rodríguez & Celina Gaitán Maldonado & Johanna López Velandia, 2014. "Las entidades financieras a lo largo del ciclo de negocios: ¿está el ciclo financiero sincronizado con el ciclo de negocios?," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 32(75), pages 28-40, December.
    2. Francisco A. Ramírez de León, 2018. "The Relation Between Credit and Business Cycles in Central America and the Dominican Republic," Investigación Conjunta-Joint Research, in: Alberto Ortiz-Bolaños (ed.), Monetary Policy and Financial Stability in Latin America and the Caribbean, edition 1, volume 1, chapter 4, pages 107-131, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    3. Mercè Sala-Rios & Teresa Torres-Solé & Mariona Farré-Perdiguer, 2016. "Credit and business cycles’ relationship: evidence from Spain," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(3), pages 149-171, December.
    4. Ramirez, Francisco, 2013. "The Relationship Between Credit and Business Cycles in Central America and the Dominican Republic," MPRA Paper 50332, University Library of Munich, Germany.
    5. Santander Quino, Camila Miriam, 2022. "Ciclos económicos y financieros: Una aproximación empírica para Bolivia," Documentos de trabajo 1/2022, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.

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    More about this item

    Keywords

    Short and Medium-Term Cycles; Frequency Domain; Granger Causality; Credit Booms and Crunches; Recession.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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