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Credit, banking fragility and economic performance

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  • Fabien Labondance

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

  • Jérôme Creel

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Paul Hubert

Abstract

Drawing on European Union data, this paper investigates the hypothesis that private credit and banking sector fragility may affect economic growth. We capture banking sector fragility both with the ratio of bank capital to assets and non-performing loans. We assess the effect of these three variables on the growth rate of GDP per capita, using the Solow growth model as a guiding framework. We observe that credit has no effect on economic performance in the EU when banking fragilities are high. However, the potential fragility of the banking sector measured by the non-performing loans decreases GDP per capita.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Fabien Labondance & Jérôme Creel & Paul Hubert, 2023. "Credit, banking fragility and economic performance," SciencePo Working papers Main hal-04329478, HAL.
    • Handle: RePEc:hal:spmain:hal-04329478
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    Cited by:

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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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