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Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars?

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This paper analyzes the equilibrium level of private credit to GDP in 11 Central and Eastern European countries on the basis of a number of dynamic panels containing quarterly data on Central and Eastern European economies, emerging markets and developed OECD countries. In doing so, we propose a unifying framework which includes factors driving both the demand for and the supply of private credit. We emphasize that relying on in-sample panel (i.e. including only transition countries) estimates for transition economies is problematic not only because of the upward bias of the estimated constant and slope coefficients due to the initial undershooting and the ensuing steady adjustment toward equilibrium, but also because of the instability of the equations estimated for transition economies. The use of out-of-sample (i.e. excluding transition economies) panels suggests that some of the transition economies might have already come close to equilibrium by 2004, whereas others have private credit-to-GDP ratios which are well below the level the fundamentals would justify.

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  • Peter Backé & Balázs Égert, 2006. "Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 112-139.
  • Handle: RePEc:onb:oenbfi:y:2006:i:1:b:3
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    1. Michael Frommel & Murat Midilic, 2016. "The Role of the Real Exchange Rate in Credit Growth in Central and Eastern European Countries: A Bank-Level Analysis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(5), pages 426-452, October.
    2. Hoffmann Andreas, 2013. "The Euro as a Proxy for the Classical Gold Standard? Government Debt Financing and Political Commitment in Historical Perspective," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 19(1), pages 41-61, November.
    3. Jakubik, Petr & Moinescu, Bogdan, 2015. "Assessing optimal credit growth for an emerging banking system," Economic Systems, Elsevier, vol. 39(4), pages 577-591.
    4. David Delia & Draganescu Marius & Paiusan Luminita & Feies Claudiu, 2014. "Trends Regarding The Evolution Of The Romanian Banking System In Relation To The Ones Belonging To Central And Eastern European Countries," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 27-32, August.
    5. Stockhammer, Engelbert & Wildauer, Rafael, 2017. "Expenditure cascades, low interest rates or property booms? Determinants of household debt in OECD countries," Greenwich Papers in Political Economy 18276, University of Greenwich, Greenwich Political Economy Research Centre.
    6. Channarith Meng & Roberto Leon Gonzalez, 2017. "Credit Booms in Developing Countries: Are They Different from Those in Advanced and Emerging Market Countries?," Open Economies Review, Springer, vol. 28(3), pages 547-579, July.
    7. Buncic, Daniel & Melecky, Martin, 2014. "Equilibrium credit: The reference point for macroprudential supervisors," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 135-154.
    8. Serwa, Dobromił, 2013. "Identifying multiple regimes in the model of credit to households," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 198-208.
    9. Greetje Everaert & Natasha X Che & Nan Geng & Bertrand Gruss & Gregorio Impavido & Yinqiu Lu & Christian Saborowski & Jérôme Vandenbussche & Li Zeng, 2015. "Does Supply or Demand Drive the Credit Cycle? Evidence from Central, Eastern, and Southeastern Europe," IMF Working Papers 15/15, International Monetary Fund.
    10. Deryugina, Elena & Kovalenko, Olga & Pantina, Irina & Ponomarenko, Alexey, 2015. "Disentangling loan demand and supply shocks in Russia," BOFIT Discussion Papers 8/2015, Bank of Finland, Institute for Economies in Transition.
    11. Elena Naumovska & Mihail Petkovski & Iskra Stanceva - Gigov, 2015. "Estimation Of The "Normal" Credit Growth In The Republic Of Macedonia With Regards To The Economic Fundamentals," Journal Articles, Center For Economic Analyses, pages 47-56, June.
    12. Sofya Donets & Alexey Ponomarenko, 2015. "Measuring Debt Burden," Bank of Russia Working Paper Series wps5, Bank of Russia.
    13. Péter Halmai & Viktória Vásáry, 2010. "Real convergence in the new Member States of the European Union (Shorter and longer term prospects)," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 7(1), pages 229-253, June.
    14. Eva Zamrazilová & Václav Žďárek, 2014. "Two Czech crises revisited: pantarhei," Chapters,in: Financial Cycles and the Real Economy, chapter 8, pages 114-144 Edward Elgar Publishing.
    15. Saša Obradović & Milka Grbić, 2015. "Causality Relationship between Financial Intermediation by Banks and Economic Growth: Evidence from Serbia," Prague Economic Papers, University of Economics, Prague, vol. 2015(1), pages 60-72.
    16. International Monetary Fund, 2006. "Republic of Latvia; Selected Issues," IMF Staff Country Reports 06/354, International Monetary Fund.
    17. repec:bof:bofitp:urn:nbn:fi:bof-201503111111 is not listed on IDEAS
    18. Jelena Laušev & Aleksandar Stojanović & Nataša Todorović, 2011. "Determinants Of Debt Rescheduling In Eastern European Countries," Economic Annals, Faculty of Economics, University of Belgrade, vol. 56(188), pages 7-31, January –.
    19. Dušan Stojanović & Danilo Stojanović, 2015. "Excessive Credit Growth Or Catching Up Process: The Case Of Central, Eastern And Southeastern European Countries," Economic Annals, Faculty of Economics, University of Belgrade, vol. 60(206), pages 7-44, July - Se.
    20. repec:eur:ejesjr:97 is not listed on IDEAS
    21. Branimir Jovanovic & Egzona Hani & Ljupka Georgievska, 2014. "Post-Crisis Credit Slowdown in South-East Europe – Return to Normality?," Working Papers 2014-01, National Bank of the Republic of Macedonia.

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