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An Anatomy of Credit Booms; Evidence From Macro Aggregates and Micro Data

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  • Marco Terrones
  • Enrique G. Mendoza

Abstract

We study the characteristics of credit booms in emerging and industrial economies. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations and widening external deficits. Micro data show a strong association between credit booms and leverage ratios, firm values, and banking fragility. We also find that credit booms are larger in emerging economies, particularly in the nontradables sector; most emerging markets crises are associated with credit booms; and credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains.

Suggested Citation

  • Marco Terrones & Enrique G. Mendoza, 2008. "An Anatomy of Credit Booms; Evidence From Macro Aggregates and Micro Data," IMF Working Papers 2008/226, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/226
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    More about this item

    Keywords

    Credit booms; Credit; Sudden stops; Financial crises; Capital inflows; WP; credit boom; business cycle; credit transmission channel; credit-GDP ratio; credit boom event; credit booms in Chile; credit expansion; credit issuance; credit transmission mechanisms; current account; dynamics of macro; private sector;
    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
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F3 - International Economics - - International Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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