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Credit-to-GDP ratios. Non-linear trends and persistence: Evidence from 44 OECD economies

Author

Listed:
  • Juan Carlos Cuestas

    (Department of Economics and Finance, Tallinn University of Technology, Estonia; IEI and Department of Economics, Universitat Jaume I, Castellón, Spain)

  • Luis A. Gil-Alana

    (Department of Economics, University of Navarra, Spain)

  • Maria Malmierca

    (Faculty of Law and Business , University Villanueva, Madrid, Spain)

Abstract

In this article we investigate the degree of persistence in the credit-to-GDP ratio in 44 OECD economies in the context of nonlinear deterministic trends. In particular, we use Chebyshev’s polynomials in time, which allow us to model changes in the data in a smoother way than by structural breaks. Our results indicate that approximately one quarter of the series display non-linear structures, and only Argentina displays a mean reverting pattern. Policy implications of the results obtained are discussed at the end of the manuscript.

Suggested Citation

  • Juan Carlos Cuestas & Luis A. Gil-Alana & Maria Malmierca, 2021. "Credit-to-GDP ratios. Non-linear trends and persistence: Evidence from 44 OECD economies," Working Papers 2021/05, Economics Department, Universitat Jaume I, Castellón (Spain).
  • Handle: RePEc:jau:wpaper:2021/05
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    More about this item

    Keywords

    Chebyshev polynomials; fractional integration; persistence; private debt;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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