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The Interdependence between Credit and Real Business Cycles in Latin American Economies

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  • José Eduardo Gómez
  • Jair Ojeda Joya
  • Fernando Tenjo Galarza
  • Héctor Manuel Zárate Solano

Abstract

In this document we estimate credit and GDP cycles for three Latin-American economies and study their relation in the time and frequency domains. Cycles are estimated in order to analyze their medium and short-term frequencies. We find that short-term cycles are usually more volatile than medium-term cycles for credit and GDP in Chile, Colombia and Peru. We also find that credit-cycle peaks in the middle 1990s and middle 2000s precede notable GDP recessions 2 or 3 years later in these countries. Additionally, credit cycles in Latin-American economies tend to cause later movements in economic activity. This effect can be decomposed into two components: first, a negative effect in the case of business-cycle frequencies, and a positive effect in the case of medium-term GDP fluctuations.

Suggested Citation

  • José Eduardo Gómez & Jair Ojeda Joya & Fernando Tenjo Galarza & Héctor Manuel Zárate Solano, 2013. "The Interdependence between Credit and Real Business Cycles in Latin American Economies," BORRADORES DE ECONOMIA 010833, BANCO DE LA REPÚBLICA.
  • Handle: RePEc:col:000094:010833
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    Cited by:

    1. Fernando Arias Rodríguez & Celina Gaitán Maldonado & Johanna López Velandia, 2014. "Las entidades financieras a lo largo del ciclo de negocios: ¿está el ciclo financiero sincronizado con el ciclo de negocios?," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 32(75), pages 28-40, December.
    2. Francisco A. Ramírez de León, 2018. "The Relation Between Credit and Business Cycles in Central America and the Dominican Republic," Investigación Conjunta-Joint Research, in: Alberto Ortiz-Bolaños (ed.), Monetary Policy and Financial Stability in Latin America and the Caribbean, edition 1, volume 1, chapter 4, pages 107-131, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    3. Ramirez, Francisco, 2013. "The Relationship Between Credit and Business Cycles in Central America and the Dominican Republic," MPRA Paper 50332, University Library of Munich, Germany.

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    More about this item

    Keywords

    Short and Medium-Term Cycles; Frequency Domain; Granger Causality; Credit Booms and Crunches; Recession.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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