Lending Booms, Real Estate Bubbles and the Asian Crisis

IMF Working Papers, February 1, 2002

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Lending Booms, Real Estate Bubbles and the Asian Crisis

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Bibliographic details

• Authors: Abdelhak S Senhadji, Charles Collyns
• Published: February 1, 2002
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451843859.001

Summary

• This paper examines the link between lending booms, asset price cycles, and financial crises across East Asian countries.
• Both theoretical arguments and empirical evidence support a strong relationship between bank lending and asset price inflation, especially in the real estate market.
• Asset price bubbles were present in most Asian countries during the 1990s; their subsequent bust affected countries quite differently, with some experiencing severe exchange and financial crises and others suffering much less damage.
• The experience underlines the importance of a strong bank regulatory system.

Major findings and analysis

• Strong relationship between bank lending and asset price inflation, particularly in real estate.
• Asset price bubbles in most Asian countries during the 1990s were a common feature.
• The bust of these bubbles produced heterogeneous outcomes across countries:
  • Some countries underwent severe exchange and financial crises.
  • Other countries weathered the bust with much less damage.
• Implicit emphasis on the interaction between credit cycles, property markets, and financial stability.

Policy implications and recommendations

• Importance of a strong bank regulatory system to mitigate the risks associated with lending booms and asset price bubbles.
• Monitoring of bank lending growth and real estate price dynamics is critical for early identification of systemic vulnerabilities.

Subjects and keywords

• Subject: Asset bubbles, Asset prices, Credit, Financial crises, Land prices, Money, Prices, Real estate prices
• Keywords: adverse selection, Asia and Pacific, Asia Crisis, Asset bubbles, asset price bubbles, Asset prices, Credit, East Asia, exchange market crisis, financial market, Land prices, Lending Booms, price index, property market, property price, rate of return, Real Estate Bubbles, Real estate prices, WP

IMF Working Paper — "Lending Booms, Real Estate Bubbles and the Asian Crisis" (Working Paper No. 2002/020).

Content in this bundle

• Lending Booms, Real Estate Bubbles and The Asian Crisis - WP/02/20
  • Lending Booms, Real Estate Bubbles and The Asian Crisis - WP/02/20 (Markdown version)
  • Lending Booms, Real Estate Bubbles and The Asian Crisis - WP/02/20 (PDF)