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An Anatomy of Credit Booms in Pakistan: Evidence from Macro Aggregates and Firm Level Data

Author

Listed:
  • Muhammad Ejaz

    (State Bank of Pakistan)

  • Muhammad Nadim Hanif

    (State Bank of Pakistan)

Abstract

We identify private credit booms in Pakistan, using fully modified HP filter, and analyze the behavior of selected macroeconomic aggregates around these booms based on annual data over the period 1960-2018. We observe that credit booms are associated with economic expansions, increasing asset prices, appreciating REER and widening of current account deficit in Pakistan. Micro data analysis shows an association between credit booms and measures of corporate leverage, valuations and profitability. Our analysis of bank level data shows similar cyclical patterns in lending activity and profitability in banking system. Lastly, we find that credit booms in Pakistan are associated with sudden stops and currency crises but not with banking crisis. These results are in line with existing evidence on credit cycles’ dynamics in emerging markets.

Suggested Citation

  • Muhammad Ejaz & Muhammad Nadim Hanif, 2018. "An Anatomy of Credit Booms in Pakistan: Evidence from Macro Aggregates and Firm Level Data," SBP Working Paper Series 101, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:101
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    File URL: http://www.sbp.org.pk/publications/wpapers/2018/wp101.pdf
    File Function: First version, 2018
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    Cited by:

    1. Muhammad Nadim Hanif & Sajjad Zaheer & Javed Iqbal, 2022. "Time-Frequency Analysis of Determinants of Inflation Rate in Pakistan," SBP Working Paper Series 111, State Bank of Pakistan, Research Department.

    More about this item

    Keywords

    Credit Booms; Business Cycles; Macroprudential Supervision;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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