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Vulnerabilities in Central and Eastern Europe : Credit Growth

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Author Info
Aleksandra Zdzienicka-Durand (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
Abstract

In this work, we try to analyze the recent credit development in 11 Central and Eastern European countries and estimate the credit-to-GDP ratio equilibrium level using filtering methods and dynamic panel estimations. Our estimation findings corroborate previous fears about the rapid credit growth in the CEECs. Indeed, in many cases the credit expansion exceeds the level justified by their fundamentals or financial development. Under normal conditions, this rapid growth and even ''overshooting'' of banking credit could be considered as an adjustment to its long-term equilibrium level. However, in the actual crisis situation, this excessive credit growth can reinforce other existing disequilibria and lead to an increase in the financial vulnerability of these countries.

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Paper provided by HAL in its series Post-Print with number halshs-00384566_v1.

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Date of creation: 2009
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Handle: RePEc:hal:journl:halshs-00384566_v1

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Related research
Keywords: Bank Credit Growth; Dynamic Panel; CEECs;

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References listed on IDEAS
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  1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier. [Downloadable!] (restricted)
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  2. M Pesaran & Yongcheol Shin & Ron P Smith, 2004. "Pooled mean group estimation of dynamic heterogeneous panels," ESE Discussion Papers 16, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
  3. Michal Brzoza-Brzezina, 2005. "Lending Booms in Europe’s Periphery: South-Western Lessons for Central-Eastern Members," Macroeconomics 0502002, EconWPA. [Downloadable!]
  4. César Calderón & Lin Liu, 2002. "The Direction of Causality Between Financial Development and Economic Growth," Working Papers Central Bank of Chile 184, Central Bank of Chile. [Downloadable!]
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  1. Albulescu, Claudiu Tiberiu, 2009. "Forecasting credit growth rate in Romania: from credit boom to credit crunch?," MPRA Paper 16740, University Library of Munich, Germany, revised 10 Aug 2009. [Downloadable!]
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This page was last updated on 2009-12-9.

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