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Credit and business cycles’ relationship: evidence from Spain

Author

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  • Mercè Sala-Rios

    (Universitat de Lleida
    University of Lleida)

  • Teresa Torres-Solé

    (Universitat de Lleida
    University of Lleida)

  • Mariona Farré-Perdiguer

    (Universitat de Lleida
    University of Lleida)

Abstract

This study provides evidence on the interaction between business and credit cycles in Spain during the period 1970–2014. The paper works on three analyses: the cycle turning points are identified; the main features of credit and business cycles are documented; and in both cycles the causal relationship is assessed. We find differences in the features of the business and credit cycle phases, which lead to a scant degree of synchronization over time. The lack of synchronization might be a sign that the cyclic interaction could be non-contemporaneous. Our results reveal that there is causation. A significant lagged relationship between business and credit cycles is found; specifically, fluctuations of the business cycle lead fluctuations of the credit to non-financial corporations and a lag exists with respect to the fluctuations of the credit to households. We also examine episodes of credit boom and credit crunch. In the period 1970–2014, Spanish credit booms did not involve deeper business cycle contractions and credit crunches were not associated with deeper and longer business cycle contractions. These differences are related with the great importance of the real estate sector in Spain.

Suggested Citation

  • Mercè Sala-Rios & Teresa Torres-Solé & Mariona Farré-Perdiguer, 2016. "Credit and business cycles’ relationship: evidence from Spain," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(3), pages 149-171, December.
  • Handle: RePEc:spr:portec:v:15:y:2016:i:3:d:10.1007_s10258-016-0124-7
    DOI: 10.1007/s10258-016-0124-7
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    Cited by:

    1. Mercè Sala-Rios & Teresa Torres-Solé & Mariona Farré-Perdiguer, 0. "Can a Multi-Criteria Methodology Fit with Non-Profit Institutions’ Decision-Making? An Application in a Spanish Non-Profit Association," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 0, pages 1-27.
    2. Mercè Sala-Rios & Teresa Torres-Solé & Mariona Farré-Perdiguer, 2020. "Can a Multi-Criteria Methodology Fit with Non-Profit Institutions’ Decision-Making? An Application in a Spanish Non-Profit Association," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 17(3), pages 289-315, September.
    3. David Peón & Manel Antelo, 2019. "Do bad borrowers hurt good borrowers? A model of biased banking competition," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 18(1), pages 5-17, February.
    4. Sala-Ríos, Mercé & Farré-Perdiguer, Mariona & Torres-Solé, Teresa, 2018. "How do Housing Prices and Business Cycles Interact in Spain? An Empirical Analysis/¿Cómo interactúan los precios de la vivienda y el ciclo económico en España? Un análisis empírico," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 36, pages 897-920, Septiembr.

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