IMF Working Papers

Credit Reversals

By Francisco F. Vazquez

April 23, 2021

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Francisco F. Vazquez Credit Reversals, (USA: International Monetary Fund, 2021) accessed November 12, 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

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.

Subject: Bank credit, Banking crises, Credit, Credit cycles, Financial crises, Financial sector policy and analysis, Money

Keywords: Bank credit, Bank credit contract, Banking crises, Banking crises database, Banking crisis, Credit, Credit cycles, Credit demand, Credit growth, Credit growth distribution, Credit reversal, Credit supply and demand, Cycle characteristic, Global, X industrial

Publication Details

  • Pages:

    34

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2021/103

  • Stock No:

    WPIEA2021103

  • ISBN:

    9781513582641

  • ISSN:

    1018-5941