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Credit Booms in Emerging Market Economies: A Recipe for Banking Crises?

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Author Info

  • Daniel Ottens
  • Edwin Lambregts
  • Steven Poelhekke

Abstract

This paper investigates whether credit booms are an important warning signal for banking crises in Asian and Latin American emerging market economies. Based on a signalling leading indicator model, the results suggest that credit booms are indeed a prelude for banking crises, especially in Latin America. To minimise a policymaker's loss- function, it is optimal to take precautionary actions in the event credit growth rises substantially above its trend.

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File URL: http://www.dnb.nl/binaries/Working%20Paper%2046_tcm46-146703.pdf
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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 046.

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Date of creation: Jun 2005
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Handle: RePEc:dnb:dnbwpp:046

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Keywords: emerging markets; credit booms and banking crises;

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  1. Demirguc, Asli & Detragiache, Enrica, 2000. "Monitoring Banking Sector Fragility: A Multivariate Logit Approach," World Bank Economic Review, World Bank Group, vol. 14(2), pages 287-307, May.
  2. Barry Eichengreen and Carlos Arteta., 2000. "Banking Crises in Emerging Markets: Presumptions and Evidence," Center for International and Development Economics Research (CIDER) Working Papers C00-115, University of California at Berkeley.
  3. Pierre-Olivier Gourinchas & Rodrigo Valdes & Oscar Landerretche, 2001. "Lending Booms: Latin America and the World," NBER Working Papers 8249, National Bureau of Economic Research, Inc.
  4. Aaron Tornell & Frank Westermann, 2002. "Boom-Bust Cycles in Middle Income Countries: Facts and Explanation," CESifo Working Paper Series 755, CESifo Group Munich.
  5. Ivanna Vladkova Hollar & Giovanni Dell'Ariccia & Carlo Cottarelli, 2003. "Early Birds, Late Risers, and Sleeping Beauties," IMF Working Papers 03/213, International Monetary Fund.
  6. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  7. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
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Cited by:
  1. Marco Terrones & Enrique G. Mendoza, 2008. "An Anatomy of Credit Booms," IMF Working Papers 08/226, International Monetary Fund.
  2. Marco Terrones & Enrique Mendoza, 2013. "Anatomy of credit booms and their demise," 2013 Meeting Papers 649, Society for Economic Dynamics.
  3. Enrique G. Mendoza & Marco E. Terrones, 2008. "An anatomy of credit booms: evidence from macro aggregates and micro data," International Finance Discussion Papers 936, Board of Governors of the Federal Reserve System (U.S.).
  4. Lahura, Erick & Chang, Giancarlo & Salazar, Oscar, 2013. "Identificación de Episodios de Auge Crediticio: Una propuesta Metodológica con Fundamentos Económicos," Working Papers 2013-011, Banco Central de Reserva del Perú.
  5. Julian Caballero, 2012. "Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises? Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom- Bust Cycles," Research Department Publications 4775, Inter-American Development Bank, Research Department.
  6. Burcu Aydin, 2008. "Banking Structure and Credit Growth in Central and Eastern European Countries," IMF Working Papers 08/215, International Monetary Fund.
  7. Enrique G. Mendoza & Marco E. Terrones, 2012. "An Anatomy of Credit Booms and their Demise," NBER Working Papers 18379, National Bureau of Economic Research, Inc.

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