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Banking crises and nonlinear linkages between credit and output

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  • Dobromil Serwa

    ()
    (Warsaw School of Economics, National Bank of Poland)

Abstract

The paper employs a recently developed procedure, based on a bivariate Markov switching model, to analyze the asymmetric causality linkages between credit growth and output growth during banking crises. Using a sample of 103 banking crises, we find that neither credit nor output leads the other variable in calm and crisis periods, although there is evidence of instantaneous regime-interdependence between the banking and real sector during crises. The linear link between credit growth and output growth is also regime-dependent.

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File URL: http://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/struktura/ZES/Documents/Working_Papers/aewp05-08.pdf
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Bibliographic Info

Paper provided by Department of Applied Econometrics, Warsaw School of Economics in its series Working Papers with number 30.

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Length: 23 pages
Date of creation: 25 Mar 2008
Date of revision:
Handle: RePEc:wse:wpaper:30

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Keywords: banking crises; credit growth; output growth; Markov switching model; causality;

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  1. Cordoba, Juan & Ripoll, Marla, 2002. "Credit Cycles Redux," Working Papers 2002-07, Rice University, Department of Economics.
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  17. Phillips, Kerk L., 1991. "A two-country model of stochastic output with changes in regime," Journal of International Economics, Elsevier, vol. 31(1-2), pages 121-142, August.
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Cited by:
  1. Joshua Aizenman & Ilan Noy, 2012. "Macroeconomic Adjustment and the History of Crises in Open Economies," NBER Working Papers 18527, National Bureau of Economic Research, Inc.
  2. Michal Franta, 2013. "The Effect of Non-Linearity Between Credit Conditions and Economic Activity on Density Forecasts," Working Papers 2013/09, Czech National Bank, Research Department.
  3. Stefano Puddu, 2013. "Real Sector and Banking System: Real and Feedback Effects. A Non-Linear VAR Approach," IRENE Working Papers 13-01, IRENE Institute of Economic Research.
  4. Bazán, Walter, 2011. "No-linealidades y asimetrías en el crédito peruano," Working Papers 2011-015, Banco Central de Reserva del Perú.

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