Credit Growth in Central and Eastern Europe: Convergence or Boom?
Credit to the private sector has been growing very rapidly in a number of Central and Eastern European countries in recent years. The main question is whether this dynamics is an equilibrium convergence process or may rather pose stability risks. Using panel econometric techniques, this paper attempts to identify the equilibrium credit/GDP levels of the new EU countries, disentangling the observed growth into an equilibrium trend and an excess (boom) component. In the paper the pooled mean group estimator was used for its flexibility and efficiency. Using instrumental variable technique we tested whether long run endogeneity affects the consistency. The estimations show that large part of the credit growth in new member states can be explained by the catching-up process, and, in general, credit/GDP ratios are below the levels consistent with macroeconomic fundamentals. However, in Latvia and Estonia credit growth is found to be significantly faster than what would be justified along the equilibrium path.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.mnb.hu/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Aaron Tornell & Frank Westermann, 2002.
"Boom-Bust Cycles in Middle Income Countries: Facts and Explanation,"
CESifo Working Paper Series
755, CESifo Group Munich.
- Aaron Tornell & Frank Westermann, 2002. "Boom-Bust Cycles in Middle Income Countries: Facts and Explanation," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 111-155.
- Aaron Tornell & Frank Westermann, 2002. "Boom-Bust Cycles in Middle Income Countries: Facts and Explanation," NBER Working Papers 9219, National Bureau of Economic Research, Inc.
- Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
When requesting a correction, please mention this item's handle: RePEc:mnb:wpaper:2006/10. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy)
If references are entirely missing, you can add them using this form.