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Excessive credit growth and countercyclical capital buffers in basel III: an empirical evidence from central and east european countries

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  • Seidler, Jakub
  • Gersl, Adam

Abstract

Excessive credit growth is often considered to be an indicator of future problems in the financial sector. This paper examines the issue of how best to determine whether the observed level of private sector credit is excessive in the context of the “countercyclical capital buffer”, a macroprudential tool proposed in the new regulatory framework of Basel II by the Basel Committee on Banking Supervision. An empirical analysis of selected Central and Eastern European countries, including the Czech Republic, provides alternative estimates of excessive private credit and shows that the HP filter calculation proposed by the Basel Committee is not necessarily a suitable indicator of excessive credit growth for converging countries.

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File URL: http://mpra.ub.uni-muenchen.de/43689/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42541.

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Date of creation: 2012
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Publication status: Published in ACTA VSFS 2.6(2012): pp. 91
Handle: RePEc:pra:mprapa:42541

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Keywords: credit growth; financial crisis; countercyclical capital buffer; Basel II;

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  1. Toshitaka Sekine, 2001. "Modeling and Forecasting Inflation in Japan," IMF Working Papers 01/82, International Monetary Fund.
  2. Edward F. Blackburne III & Mark W. Frank, 2007. "Estimation of nonstationary heterogeneous panels," Stata Journal, StataCorp LP, StataCorp LP, vol. 7(2), pages 197-208, June.
  3. Calza, Alessandro & Gartner, Christine & Sousa, João, 2001. "Modelling the demand for loans to the private sector in the euro area," Working Paper Series 0055, European Central Bank.
  4. Gabriel Jiménez & Jesús Saurina, 2006. "Credit Cycles, Credit Risk, and Prudential Regulation," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
  5. Claudio Borio & Mathias Drehmann, 2009. "Assessing the risk of banking crises - revisited," BIS Quarterly Review, Bank for International Settlements, March.
  6. Markus Eller & Michael Frömmel & Nora Srzentic, 2010. "Private Sector Credit in CESEE: Long-Run Relationships and Short-Run Dynamics," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 50-78.
  7. Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and banking in a DSGE model of the euro area," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 740, Bank of Italy, Economic Research and International Relations Area.
  8. Michal Brzoza-Brzezina, 2005. "Lending Booms in Europe’s Periphery: South-Western Lessons for Central-Eastern Members," Macroeconomics, EconWPA 0502002, EconWPA.
  9. Cottarelli, Carlo & Dell'Ariccia, Giovanni & Vladkova-Hollar, Ivanna, 2005. "Early birds, late risers, and sleeping beauties: Bank credit growth to the private sector in Central and Eastern Europe and in the Balkans," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 83-104, January.
  10. Kraft, Evan & Jankov, Ljubinko, 2005. "Does speed kill? Lending booms and their consequences in Croatia," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 105-121, January.
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Cited by:
  1. Farrell, Greg, 2014. "Countercyclical capital buffers and real-time credit-to-GDP gap estimates: A South African perspective," MPRA Paper 55368, University Library of Munich, Germany.
  2. Mathias Drehmann & Kostas Tsatsaronis, 2014. "The credit-to-GDP gap and countercyclical capital buffers: questions and answers," BIS Quarterly Review, Bank for International Settlements, March.

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