Financial Conditions and Growth at Risk in the ECCU

November 15, 2019

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Format: Chicago

Takuji Komatsuzaki, and Steve Brito. Financial Conditions and Growth at Risk in the ECCU, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We study the growth determinants in the Eastern Caribbean Currency Union (ECCU), using the Growth at Risk (GaR) framework with a focus on financial variables. We find that excessive bank credit growth is associated with lower future real GDP growth in the medium term especially on the low quantiles of growth distribution. Moreover, worsening of both global financial conditions and external conditions are associated with lower future growth in the short term, especially at the high quantiles of growth distribution. Country-specific results are broadly in line with ECCU-wide results, with some variation potentially due to the strong Citizenship-By-Investment program inflows and lack of credit union data. The establishment of a macroprudential framework in the ECCU would need to pay close attention to credit growth not only of banks but also credit unions and continue to monitor global and external conditions.

Subject: Bank credit, Credit, Credit bureaus, Environment, Financial markets, Financial sector policy and analysis, Financial soundness indicators, Money, Natural disasters

Keywords: Bank credit, Caribbean, Credit, Credit bureaus, Downside risks, ECCU country, ECCU economy, Estimate, Financial soundness indicators, Global, Growth rate, Macrofinancial linkages, Natural disasters, NPL ratio, Quantile, Quantile regression coefficients, Regression coefficient, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/247
Stock No:

WPIEA2019247
ISBN:

9781513513294
ISSN:

1018-5941

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