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Credit and economic recovery

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  • Michael Biggs
  • Thomas Mayer
  • Andreas Pick
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    Abstract

    It has become almost a stylized fact that after financial crises, economic activity recovers without a rebound in credit. We investigate the relationship between credit and economic activity over the business cycle. In a simple model we show that a rebound in the flow of credit has closer relationship with economic recovery than a rebound in the stock of credit. Using data from developed and emerging market countries we find that the flow of credit has a higher correlation with GDP than the stock of credit, in particular during recovery periods from financial crises.

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    File URL: http://www.dnb.nl/binaries/Working%20paper%20218_tcm46-220409.pdf
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    Bibliographic Info

    Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 218.

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    Date of creation: Jul 2009
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    Handle: RePEc:dnb:dnbwpp:218

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    1. Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Phoenix Miracles in Emerging Markets: Recovering without Credit from Systemic Financial Crises," Research Department Publications 4474, Inter-American Development Bank, Research Department.
    2. Marco Terrones & M. Ayhan Kose & Stijn Claessens, 2008. "What Happens During Recessions, Crunches, and Busts?," IMF Working Papers 08/274, International Monetary Fund.
    3. Guillermo A. Calvo & Alejandro Izquierdo & Ernesto Talvi, 2006. "Sudden Stops and Phoenix Miracles in Emerging Markets," American Economic Review, American Economic Association, vol. 96(2), pages 405-410, May.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison," NBER Working Papers 13761, National Bureau of Economic Research, Inc.
    5. Jan F. Kiviet & Jerzy Niemczyk, 2006. "The Asymptotic and Finite Sample Distributions of OLS and Simple IV in Simultaneous Equations," Tinbergen Institute Discussion Papers 06-078/4, Tinbergen Institute.
    6. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Forte, Antonio, 2012. "Italy after the crisis: a case of recoveryless credit growth," MPRA Paper 35775, University Library of Munich, Germany.
    2. Lahura, Erick & Vega, Hugo, 2010. "El Impulso Crediticio y el PBI en el Perú: 1992–2009," Revista Moneda, Banco Central de Reserva del Perú, issue 146, pages 8-12.
    3. Boysen-Hogrefe, Jens & Dovern, Jonas & Groll, Dominik & van Roye, Björn & Scheide, Joachim, 2010. "Droht in Deutschland eine Kreditklemme?," Kiel Discussion Papers 472/473, Kiel Institute for the World Economy (IfW).
    4. Matteo Ciccarelli & Eva Ortega & Maria Teresa Valderrama, 2012. "Heterogeneity and cross-country spillovers in macroeconomic-financial linkages," Banco de Espa�a Working Papers 1241, Banco de Espa�a.
    5. Boysen-Hogrefe, Jens & Dovern, Jonas & Gern, Klaus-Jürgen & Jannsen, Nils & van Roye, Björn & Scheide, Joachim, 2010. "Erholung der Weltkonjunktur ohne große Dynamik," Open Access Publications from Kiel Institute for the World Economy 32955, Kiel Institute for the World Economy (IfW).

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