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Do Credit Shocks Matter? A Global Perspective

  • Thomas Helbling
  • M. Ayhan Kose
  • Christopher Otrok
  • Raju Huidrom

This paper examines the importance of credit market shocks in driving global business cycles over the period 1988:1-2009:4. We first estimate common components in various macroeconomic and financial variables of the G-7 countries. We then evaluate the role played by credit market shocks using a series of VAR models. Our findings suggest that these shocks have been influential in driving global activity during the latest global recession. Credit shocks originating in the United States also have a significant impact on the evolution of world growth during global recessions.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/261.

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Length: 37
Date of creation: 01 Nov 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/261
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