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Household Credit Markets During the Financial Crisis of 2008/2009

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  • Gabriel Aparici
  • Fernando Sepúlveda

Abstract

In this paper we study several elements that allow us to explain the greater resilience of household credit markets in emerging economies, and particularly in Chile during the international financial crisis of 2008-2009. The main features identified are primarily related to the development dynamics of these markets, such as a stronger presence of traditional banking in financial intermediation, marginally relevant structured finance markets and derivative products operations of a less diverse and complex nature. In the particular case of the Chilean economy we also analyze idiosyncratic factors such as, for instance, the consolidation of a selective demand driven by institutional investors. Regarding the regulatory issues analyzed, we argue that the basic set of tools available, for either advanced or emerging economies, tends to lose effectiveness in the face of the highly complex financial interactions observed in some of the advanced economies most affected by the crisis. Finally, based on this latter argument, we propose some topics for discussion that could contribute in the development of the financial system in Chile; such as expanding the reach of supervision and regulation, moving towards a consolidated supervision scheme and reducing potential procyclicalities in the available prudential regulation tools.

Suggested Citation

  • Gabriel Aparici & Fernando Sepúlveda, 2010. "Household Credit Markets During the Financial Crisis of 2008/2009," Working Papers Central Bank of Chile 591, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:591
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    References listed on IDEAS

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    1. Jacob Gyntelberg & Eli M Remolona, 2006. "Securitisation in Asia and the Pacific: implications for liquidity and credit risks," BIS Quarterly Review, Bank for International Settlements, June.
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    3. Eliana Balla & Andrew McKenna, 2009. "Dynamic provisioning: a countercyclical tool for loan loss reserves," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 383-418.
    4. Jesus Saurina, 2009. "Dynamic Provisioning," World Bank Other Operational Studies 10241, The World Bank.
    5. Augusto de la Torre & Alain Ize, 2010. "Regulatory Reform: Integrating Paradigms," International Finance, Wiley Blackwell, vol. 13(1), pages 109-139, March.
    6. Xavier Freixas & Jean-Charles Rochet, 2008. "Microeconomics of Banking, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062704, January.
    7. Claudio Borio & Patrick McGuire, 2004. "Twin peaks in equity and housing prices?," BIS Quarterly Review, Bank for International Settlements, March.
    8. Giovanni Dell’Ariccia & Deniz Igan & Luc Laeven, 2012. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 367-384, March.
    9. Robert Rennhack, 2009. "Global Financial Regulatory Reform; Implications for Latin America and the Caribbean (LAC)," IMF Staff Position Notes 2009/19, International Monetary Fund.
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