Household Credit Markets During the Financial Crisis of 2008/2009
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.
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