Credit Booms And Macroeconomic Dynamics
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Credit Booms And Macroeconomic Dynamics
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Author : Mr.Marco Arena
language : en
Publisher: International Monetary Fund
Release Date : 2015-01-22
Credit Booms And Macroeconomic Dynamics written by Mr.Marco Arena and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-01-22 with Business & Economics categories.
Using a comprehensive database on bank credit, covering 135 developing countries over the period 1960–2011, we identify, document, and compare the macro-economic dynamics of credit booms across low- and middle-income countries. The results suggest that while the duration and magnitude of credit booms is similar across country groups, macro-economic dynamics differ somewhat in low-income countries. We further find that surges in capital inflows are associated with credit booms. Moreover, credit booms associated with banking crises exhibit distinct macroeconomic dynamics, while also reflecting a potentially large deviation of credit from country fundamentals. These results suggest that low-income countries should remain mindful of the inter-linkages between financial liberalization, increased cross-border banking activities, and rapid credit growth.
Macroeconomics And Financial Crises
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Author : Gary B. Gorton
language : en
Publisher: Princeton University Press
Release Date : 2023-07-11
Macroeconomics And Financial Crises written by Gary B. Gorton and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-07-11 with Business & Economics categories.
How financial crises are inherent features of macroeconomic dynamics There are no bigger disruptions in the functioning of economies than financial crises. Yet prior to the crash of 2007–2008, macroeconomics incorporated financial crises simply as bad shocks, like earthquakes, failing to consider them as an intrinsic phenomenon of the evolution of macroeconomic variables, such as credit, investment, and productivity. Macroeconomics and Financial Crises rethinks how technological change, credit booms, and endogenous information production combine to generate financial crises as inherent and recurrent reactions to macroeconomic dynamics. Gary Gorton and Guillermo Ordoñez identify short-term debt, collateral, and information as common elements that are present in all financial crises. Short-term debt is a critical element for storing value over short periods without fear of loss, but there needs to be collateral backing the debt. Critically, the collateral should be such that no agent wants to produce information about its quality. The debt backed by such collateral is information-insensitive. Gorton and Ordoñez argue that, during a credit boom, as more and more firms get loans, the economy reaches a tipping point where information production becomes too tempting, disrupting short-term debt and cutting most firms out of the credit market. Showing how a financial crisis is an information event triggered by the dynamics of macroeconomic variables, Macroeconomics and Financial Crises provides new perspectives on the intricate relations between macroeconomics and financial crises.
An Anatomy Of Credit Booms
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Author : Mr.Marco Terrones
language : en
Publisher: International Monetary Fund
Release Date : 2008-09-01
An Anatomy Of Credit Booms written by Mr.Marco Terrones and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-09-01 with Business & Economics categories.
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.
Rapid Credit Growth
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Author : Selim Elekdag
language : en
Publisher: International Monetary Fund
Release Date : 2011-10-01
Rapid Credit Growth written by Selim Elekdag and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-10-01 with Business & Economics categories.
Episodes of rapid credit growth, especially credit booms, tend to end abruptly, typically in the form of financial crises. This paper presents the findings of a comprehensive event study focusing on 99 credit booms. Loose monetary policy stances seem to have contributed to the build-up of credit booms across both advanced and emerging economies. In particular, domestic policy rates were below trend during the pre-peak phase of credit booms and likely fuelled macroeconomic and financial imbalances. For emerging economies, while credit booms are associated with episodes of large capital inflows, international interest rates (a proxy for global liquidity) are virtually flat during these periods. Therefore, although external factors such as global liquidity conditions matter, and possibly increasingly so over time, domestic factors (especially monetary policy) also appear to be important drivers of real credit growth across emerging economies.
External Imbalances And Financial Crises
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Author : Alan Taylor
language : en
Publisher: International Monetary Fund
Release Date : 2013-12-20
External Imbalances And Financial Crises written by Alan Taylor and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-12-20 with Business & Economics categories.
Consider two views of the global financial crisis. One view looks across the border: it blames external imbalances, the unprecedented current account deficits and surpluses in recent years. Another view looks within the border: it faults domestic financial systems where risks originated in excessive credit booms. We can use the lens of macroeconomic and financial history to confront these dueling hypotheses with evidence. The credit boom explanation is the most plausible predictor of crises since the late nineteenth century; global imbalances have only a weak correlation with financial distress compared to indicators drawn from the financial system itself.
Capital Inflows Exchange Rate Flexibility And Credit Booms
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Author : Mr.Nicolas E. Magud
language : en
Publisher: International Monetary Fund
Release Date : 2012-02-01
Capital Inflows Exchange Rate Flexibility And Credit Booms written by Mr.Nicolas E. Magud and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-02-01 with Business & Economics categories.
The prospects of expansionary monetary policies in the advanced countries for the foreseeable future have renewed the debate over policy options to cope with large capital inflows that are, at least partly, driven by low interest rates in the financial centers. Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, we analyze the impact of exchange rate flexibility on credit markets during periods of large capital inflows. We show that bank credit grows more rapidly and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies with more flexible regimes. Our findings thus suggest countries with less flexible exchange rate regimes may stand to benefit the most from regulatory policies that reduce banks' incentives to tap external markets and to lend/borrow in foreign currency; these policies include marginal reserve requirements on foreign lending, currency-dependent liquidity requirements, and higher capital requirement and/or dynamic provisioning on foreign exchange loans.
Rapid Credit Growth In Azerbaijan
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Author : Rashad Karimov
language : en
Publisher: GRIN Verlag
Release Date : 2010-08
Rapid Credit Growth In Azerbaijan written by Rashad Karimov and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-08 with Credit categories.
Master's Thesis from the year 2010 in the subject Economics - Macro-economics, general, grade: A-, Central European University Budapest, language: English, abstract: This thesis investigates a credit boom in Azerbaijan in 2008 year. I also employ VECM to my model to figure out long-run and short-run dynamics and equilibrium level of credit. This paper also studies macroeconomic implications of high credit expansion. The study shows that credit boom creates non-trivial risk for macro aggregates and is followed by financial crisis in the economy.
Discerning Good From Bad Credit Booms
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Author : Mr.Giovanni Dell'Ariccia
language : en
Publisher: International Monetary Fund
Release Date : 2020-02-12
Discerning Good From Bad Credit Booms written by Mr.Giovanni Dell'Ariccia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-02-12 with Business & Economics categories.
Credit booms are a focal point for policymakers and scholars of financial crises. Yet our understanding of how the real sector behaves during booms, and why some booms may go bad, is limited. Despite a large and growing body of literature, most of the work has focused on aggregate economic activity, and relatively little is known about which industries benefit and which suffer during these episodes. This note aims to fill this gap by analyzing disaggregated output and employment data in a large sample of advanced and emerging market economies between 1970 and 2014.
Asset Prices Booms And Recessions
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Author : Willi Semmler
language : en
Publisher: Springer Science & Business Media
Release Date : 2007-03-21
Asset Prices Booms And Recessions written by Willi Semmler and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-03-21 with Business & Economics categories.
"Asset Prices, Booms and Recessions" is a book on Financial Economics from a dynamic perspective. It focuses on the dynamic interaction of financial markets and economic activity. The financial markets to be studied here encompasses the money and bond market, credit market, stock market and foreign exchange market. Economic activity is described by the activity of firms, banks, households, governments and countries. The book shows how economic activity affects asset prices and the financial market and how asset prices and financial market volatility feed back to economic activity. The focus in this book is on theories, dynamic models and empirical evidence. Empirical applications relate to episodes of financial instability and financial crises of the U.S., Latin American, Asian as well as Euro-area countries. The current version of the book has moved to a more extensive coverage of the topics in financial economics by updating the literature in the appropriate chapters. Moreover it gives a more extensive treatment of new and more advanced topics in financial economics such as international portfolio theory, multi-agent and evolutionary approaches, capital asset pricing beyond consumption-based models and dynamic portfolio decisions. Overall, the book presents material that researchers and practitioners in financial engineering need to know about economic dynamics and that economists, practitioners and policy makers need to know about the financial market.
Credit Reversals
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Author : Mr. Francisco F. Vazquez
language : en
Publisher: International Monetary Fund
Release Date : 2021-04-23
Credit Reversals written by Mr. Francisco F. Vazquez and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-04-23 with Business & Economics categories.
This paper studies episodes in which aggregate bank credit contracts alongside expanding economic activity—credit reversals. Using data for 179 countries during 1960‒2017, the paper finds that reversals are a relatively common phenomenon--on average, they occur every five years. By comparison, banking crises take place every eight years on average. Credit reversals and banking crises also appear related to each other: reversals become more likely in the aftermath of banking crises, while the likelihood of crises drops following reversals. In terms of foregone economic activity, reversals are shown to be very costly, at about two-thirds of the costs of banking crises after taking into account their relative frequencies.