Determinants of Credit Growth in Selected Central and Eastern European Countries

The objective of the paper was to identify the main determinants of the dynamics in lending within selected Central and Eastern European countries, namely Romania, the Czech Republic, Hungary and Poland during the period 2005-2023. Credit dynamics is essential for financial stability, being influenced by various macroeconomic factors whose impact remains insufficiently explored. This gap serves as an important motivation for this study. Two approaches were used in this regard – specific links were analyzed based on multivariate regression models, on the one hand, from an aggregate perspective by means of a panel data model for the selected countries and, on the other hand, at the level of each country. The determinants of the lending dynamics were found both for the non-governmental lending, as well as at the sectoral level – household loans and corporate loans. The panel data model for the selected countries shows that the main determinants of credit are government spending, interest rate, unemployment rate, and gross domestic product per capita. In addition to the four factors in the main model, in the secondary models, another significant factor in the credit dynamics is the financial stress indicator. For the country-based analysis, as a general feature, in all the four states, an expansionist fiscal policy, materialized in a government spending increase, has a positive effect on non-governmental lending. Furthermore, a higher level of financial stress has the effect of decreasing lending activity at both the aggregate level and the sectoral level.