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Vulnerabilities in Central and Eastern Europe : Credit Growth

  • Aleksandra Zdzienicka-Durand

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

In this work, we try to analyze the recent credit development in 11 Central and Eastern European countries and estimate the credit-to-GDP ratio equilibrium level using filtering methods and dynamic panel estimations. Our estimation findings corroborate previous fears about the rapid credit growth in the CEECs. Indeed, in many cases the credit expansion exceeds the level justified by their fundamentals or financial development. Under normal conditions, this rapid growth and even ''overshooting'' of banking credit could be considered as an adjustment to its long-term equilibrium level. However, in the actual crisis situation, this excessive credit growth can reinforce other existing disequilibria and lead to an increase in the financial vulnerability of these countries.

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Paper provided by HAL in its series Post-Print with number halshs-00384566.

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Date of creation: 2009
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Handle: RePEc:hal:journl:halshs-00384566
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  1. Egert, Balázs & Backé, Peter & Zumer, Tina, 2006. "Credit growth in Central and Eastern Europe: new (over)shooting stars?," Working Paper Series 0687, European Central Bank.
  2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  3. Gourinchas, Pierre-Olivier & Landerretche, Oscar & Valdés, Rodrigo, 2001. "Lending Booms: Latin America and the World," CEPR Discussion Papers 2811, C.E.P.R. Discussion Papers.
  4. Cottarelli, Carlo & Dell'Ariccia, Giovanni & Vladkova-Hollar, Ivanna, 2005. "Early birds, late risers, and sleeping beauties: Bank credit growth to the private sector in Central and Eastern Europe and in the Balkans," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 83-104, January.
  5. Gergely Kiss & Márton Nagy & Balázs Vonnák, 2006. "Credit Growth in Central and Eastern Europe: Convergence or Boom?," MNB Working Papers 2006/10, Magyar Nemzeti Bank (the central bank of Hungary).
  6. Michal Brzoza-Brzezina, 2005. "Lending Booms in Europe’s Periphery: South-Western Lessons for Central-Eastern Members," Macroeconomics 0502002, EconWPA.
  7. Reinhart, Carmen, 2002. "Sovereign Credit Ratings Before and After Financial Crises," MPRA Paper 7410, University Library of Munich, Germany.
  8. Coudert, V. & Pouvelle, C., 2008. "La croissance des crédits dans les pays d’Europe centrale et orientale est-elle excessive ?," Bulletin de la Banque de France, Banque de France, issue 172, pages 39-67.
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