Does Supply or Demand Drive the Credit Cycle? Evidence from Central, Eastern, and Southeastern Europe

By Greetje Everaert, Natasha X Che, Nan Geng, Bertrand Gruss, Gregorio Impavido, Yinqiu Lu, Christian Saborowski, Jerome Vandenbussche, Li Zeng

January 23, 2015

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Greetje Everaert, Natasha X Che, Nan Geng, Bertrand Gruss, Gregorio Impavido, Yinqiu Lu, Christian Saborowski, Jerome Vandenbussche, and Li Zeng. Does Supply or Demand Drive the Credit Cycle? Evidence from Central, Eastern, and Southeastern Europe, (USA: International Monetary Fund, 2015) accessed December 30, 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

Countries in Central, Eastern, and Southeastern Europe (CESEE) experienced a credit boom-bust cycle in the last decade. This paper analyzes the roles of demand and supply factors in explaining this credit cycle. Our analysis first focuses on a large sample of bank-level data on credit growth for the entire CESEE region. We complement this analysis by five case studies (Latvia, Lithuania, Montenegro, Poland, and Romania). Our results of the panel data analysis indicate that supply factors, on average and relative to demand factors, gained in importance in explaining credit growth in the post-crisis period. In the case studies, we find a similar result for Lithuania and Montenegro, but the other three case studies point to the fact that country experiences were heterogeneous.

Subject: Bank credit, Banking, Consumer credit, Credit, Credit booms, Financial institutions, Loans, Money

Keywords: Asset quality, Baltics, Bank characteristic, Bank credit, Bank funding, Consumer credit, Credit, Credit booms, Credit demand, Credit growth, Credit supply, Credit to household, Demand and supply, Demand and supply factor, Demand development, Disequilibrium Model, Eastern Europe, Excess demand, Excess supply, Global, Loans, Parent bank, WP

Publication Details

Pages:

61
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/015
Stock No:

WPIEA2015015
ISBN:

9781484379981
ISSN:

1018-5941

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