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An Anatomy of Credit Booms

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  • Marco Terrones
  • Enrique G. Mendoza

Abstract

We study the characteristics of credit booms in emerging and industrial economies. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations and widening external deficits. Micro data show a strong association between credit booms and leverage ratios, firm values, and banking fragility. We also find that credit booms are larger in emerging economies, particularly in the nontradables sector; most emerging markets crises are associated with credit booms; and credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/226.

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Length: 50
Date of creation: 01 Sep 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/226

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Keywords: Business cycles; Emerging markets; Credit expansion; Current account deficits; Productivity; credit booms; capital inflows; credit boom; financial reforms; financial indicators; capital adequacy; financial crises; currency crises; banking crises; capital adequacy ratio; current account balance; financial crisis; capital expenditures; consumer price index; debt crisis; capital flows; equity prices; reserve requirements; recessions; foreign capital; financial deepening; real appreciation; securitization; capital inflow; capital account restrictions; short term debt; bank nationalization; working capital; financial integration; likelihood of financial crises; currency crisis; asian financial crisis; crisis countries; banking crisis; credit market; bank runs; stock exchanges; debt service; financial liberalization; prudential regulation; macroeconomic policies; banking supervision; securities markets; securities market;

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References

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