Recent theories on the origins of crises put lending booms at the root of financial collapses. Yet lending booms may be a natural consequence of economic development and fluctuations. So, are lending booms dangerous? In this Paper, we investigate this question empirically using a broad sample of lending boom episodes over 40 years, with a special eye on Latin America. Our results indicate that: (1) lending booms are often associated with (i) a domestic investment boom, (ii) an increase in domestic interest rates, (iii) a worsening of the current account, (iv) a decline in reserves, (v) a real appreciation, and (vi) a decline in output growth; (2) lending booms typically do not substantially increase the vulnerability of the banking sector or the balance of payments. On comparing Latin America and the rest of the world, we find that Latin American lending booms make the economy considerably more volatile and vulnerable to financial and balance-of-payment crises than is the case in other regions.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2811.
Find related papers by JEL classification: E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Did you know? You can import bibliographic info in various formats into you bibliographic tool, or just into your word processor. See under "publisher info" on each abstract page.