An Anatomy of Credit Booms: Evidence From Macro Aggregates and Micro Data

September 1, 2008

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Format: Chicago

Marco Terrones, and Enrique G. Mendoza An Anatomy of Credit Booms: Evidence From Macro Aggregates and Micro Data, (USA: International Monetary Fund, 2008) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Capital inflows, Credit, Credit booms, Financial crises, Sudden stops

Keywords: Business cycle, Credit boom, Credit boom event, Credit booms in Chile, Credit expansion, Credit issuance, Credit transmission channel, Credit transmission mechanisms, Credit-GDP ratio, Current account, Dynamics of macro, Private sector, WP

Publication Details

Pages:

50
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/226
Stock No:

WPIEA2008226
ISBN:

9781451870848
ISSN:

1018-5941

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