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Credit and economic recovery

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  • Michael Biggs
  • Thomas Mayer
  • Andreas Pick

Abstract

It has become almost a stylized fact that after financial crises, economic activity recovers without a rebound in credit. We investigate the relationship between credit and economic activity over the business cycle. In a simple model we show that a rebound in the flow of credit has closer relationship with economic recovery than a rebound in the stock of credit. Using data from developed and emerging market countries we find that the flow of credit has a higher correlation with GDP than the stock of credit, in particular during recovery periods from financial crises.

Suggested Citation

  • Michael Biggs & Thomas Mayer & Andreas Pick, 2009. "Credit and economic recovery," DNB Working Papers 218, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:218
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    File URL: https://www.dnb.nl/binaries/Working%20paper%20218_tcm46-220409.pdf
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    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299, September.
    5. Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2009. "What happens during recessions, crunches and busts?," Economic Policy, CEPR;CES;MSH, vol. 24, pages 653-700, October.
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    Cited by:

    1. Boysen-Hogrefe, Jens & Dovern, Jonas & Gern, Klaus-Jürgen & Jannsen, Nils & van Roye, Björn & Scheide, Joachim, 2010. "Erholung der Weltkonjunktur ohne große Dynamik," Open Access Publications from Kiel Institute for the World Economy 32955, Kiel Institute for the World Economy (IfW).
    2. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(2 (Fall)), pages 325-388.
    3. Mariarosaria Comunale, 2017. "Synchronicity of real and financial cycles and structural characteristics in EU countries," CEIS Research Paper 414, Tor Vergata University, CEIS, revised 25 Sep 2017.
    4. Matteo Ciccarelli & Eva Ortega & Maria Teresa Valderrama, 2012. "Heterogeneity and cross-country spillovers in macroeconomic-financial linkages," Working Papers 1241, Banco de España;Working Papers Homepage.
    5. Boysen-Hogrefe, Jens & Dovern, Jonas & Groll, Dominik & van Roye, Björn & Scheide, Joachim, 2010. "Droht in Deutschland eine Kreditklemme?," Kiel Discussion Papers 472/473, Kiel Institute for the World Economy (IfW).
    6. Katalin Bodnár & Zsolt Kovalszky & Emese Hudák, 2014. "Recovery from crises and lending," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 13(4), pages 57-85.
    7. Forte, Antonio, 2012. "Italy after the crisis: a case of recoveryless credit growth," MPRA Paper 35775, University Library of Munich, Germany.
    8. Semmler, Willi & Gross, Marco, 2017. "Mind the output gap: the disconnect of growth and inflation during recessions and convex Phillips curves in the euro area," Working Paper Series 2004, European Central Bank.
    9. Lahura, Erick & Vega, Hugo, 2010. "El Impulso Crediticio y el PBI en el Perú: 1992–2009," Revista Moneda, Banco Central de Reserva del Perú, issue 146, pages 8-12.
    10. Ciccarelli Matteo & Ortega Eva & Valderrama Maria Teresa, 2016. "Commonalities and cross-country spillovers in macroeconomic-financial linkages," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(1), pages 231-275, January.
    11. Albuquerque, Bruno & Baumann, Ursel & Seitz, Franz, 2016. "What does money and credit tell us about real activity in the United States?," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 328-347.

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