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Do Credit Shocks Matter? A Global Perspective

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  • Thomas Helbling
  • M. Ayhan Kose
  • Christopher Otrok
  • Raju Huidrom

Abstract

This paper examines the importance of credit market shocks in driving global business cycles over the period 1988:1-2009:4. We first estimate common components in various macroeconomic and financial variables of the G-7 countries. We then evaluate the role played by credit market shocks using a series of VAR models. Our findings suggest that these shocks have been influential in driving global activity during the latest global recession. Credit shocks originating in the United States also have a significant impact on the evolution of world growth during global recessions.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/261.

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Length: 37
Date of creation: 01 Nov 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/261

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Keywords: Economic models; Economic recession; External shocks; Group of seven; recession; recessions; global recession; global recessions; financial markets; bond; corporate bond; financial crises; financial sector; bonds; financial crisis; asset markets; global financial crisis; financial cycles; financial market; financial system; bond yield; banking crises; bond spreads; equity markets; corporate bonds; systemic banking crises; deposit money banks; deposit money; credit booms; financial intermediation; financial stability; bond portfolio; exchange rate crisis; financial sector problems; stock markets; financial economics; financial structure; financial systems; bond spread; financial intermediaries;

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