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Assessing the Sustainability of Credit Growth: the Case of Central and Eastern European Countries

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  • Virginie Coudert
  • Cyril Pouvelle

Abstract

Strong credit growth rates in transition countries may result from a normal catching-up process in a framework of financial development. However, as elsewhere, they can also pertain to a “credit boom”, paving the way to future “credit crunches”. We try to disentangle these two types of situation for the central and eastern European countries (CEECs) by applying a number of methods. First, we consider the gap between current credit and its longterm trend and we find some signs of credit booms, in several CEECs in 2005-2007. Second, we assess the “normal” growth of credit with regard to fundamentals through econometric estimations. Credit growth is also shown to have been excessive in several countries just before the 2008-2009 financial crisis.

Suggested Citation

  • Virginie Coudert & Cyril Pouvelle, 2009. "Assessing the Sustainability of Credit Growth: the Case of Central and Eastern European Countries," Working Papers 2009-33, CEPII research center.
    • Handle: RePEc:cii:cepidt:2009-33
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    More about this item

    Keywords

    CREDIT BOOM; TRANSITION; FINANCIAL DEVELOPMENT;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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