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The Macroeconomic Relevance of Credit Flows

Author : Alexander Herman

Publisher : International Monetary Fund

Page : 41 pages

File Size : 42,16 MB

Release : 2015-06-30

Category : Business & Economics

ISBN : 1513516442

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Book Description

This paper exploits the Financial Accounts of the United States to derive long time series of bank and nonbank credit to different sectors, and to examine the cyclical behavior of these series in relation to (i) the long-term business cycle, (ii) recessions and recoveries, and (iii) systemic financial crises. We find that bank and nonbank credit exhibit different dynamics throughout the business cycle. This diverging cyclical behavior of output and bank and nonbank credit argues for placing greater emphasis on sector-specific macroprudential measures to contain risks to the financial system, rather than using interest rates to address any vulnerabilities. Finally, we examine the role of bank and nonbank credit in the creation of financial interconnections and illustrate a method to conduct macro-financial stability assessments.



Macroprudential Policy

Author : R. Barwell

Publisher : Springer

Page : 544 pages

File Size : 22,33 MB

Release : 2013-05-07

Category : Business & Economics

ISBN : 1137274468

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Book Description

The financial crisis of 2008 is probably the single most important economic event in post-war history. Macroprudential policy is the response to that crisis – a determined attempt to stabilize the financial system. This book explains why it is necessary, who will be responsible for executing this responsibility and how they will go about doing it.



Slowdown of Credit Flows in Jordan in the Wake of the Global Financial Crisis

Author : Mr.Tigran Poghosyan

Publisher : International Monetary Fund

Page : 17 pages

File Size : 31,68 MB

Release : 2010-11-01

Category : Business & Economics

ISBN : 1455209562

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Book Description

This paper estimates a disequilibrium model of credit supply and demand to evaluate the relative role of these factors in the slowdown of credit flows in the Jordanian economy in the wake of the global financial crisis. The empirical analysis suggests that the credit stagnation is mainly driven by the restricted credit supply amid tighter monetary policy conditions in Jordan relative to the United States, as evidenced by the widened interest differential between the Central Bank of Jordan (CBJ) re-discount and the U.S. Federal Reserve funds rates. Although it appears that demand side factors related to the slowdown of economic activity have also had an impact, their role has been relatively modest. The estimation results imply that economic policies targeted towards stimulating supply of credit are likely to be a more effective tool for expanding credit flows relative to demand stimulating policies.



Capital Flows and Economic Fluctuations

Author : Yong Sarah Zhou

Publisher : International Monetary Fund

Page : 36 pages

File Size : 43,96 MB

Release : 2008

Category : Business & Economics

ISBN :

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Book Description

This paper uses a general equilibrium model to examine the central role played by commercial banks in intermediating and amplifying the capital flow shocks to the local economy in the 1997 Asia financial crisis. It finds that a sudden stop of capital inflows affects the equilibrium credit supply through two channels: first, the plunge of foreign financing decreases the loanable funds directly; and second the sudden stop drives up the cost of providing banking services, thereby additionally reducing the available bank credit to firms through a "deposit run". Empirical results from a VAR model broadly support the theoretical implications.





Credit Booms and Macroeconomic Dynamics

Author : Mr.Marco Arena

Publisher : International Monetary Fund

Page : 47 pages

File Size : 21,47 MB

Release : 2015-01-22

Category : Business & Economics

ISBN : 1498355269

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Book Description

Using a comprehensive database on bank credit, covering 135 developing countries over the period 1960–2011, we identify, document, and compare the macro-economic dynamics of credit booms across low- and middle-income countries. The results suggest that while the duration and magnitude of credit booms is similar across country groups, macro-economic dynamics differ somewhat in low-income countries. We further find that surges in capital inflows are associated with credit booms. Moreover, credit booms associated with banking crises exhibit distinct macroeconomic dynamics, while also reflecting a potentially large deviation of credit from country fundamentals. These results suggest that low-income countries should remain mindful of the inter-linkages between financial liberalization, increased cross-border banking activities, and rapid credit growth.



Capital Flows, Financial Intermediation and Macroprudential Policies

Author : Matteo Ghilardi

Publisher : International Monetary Fund

Page : 31 pages

File Size : 20,79 MB

Release : 2014-08-21

Category : Business & Economics

ISBN : 1498365655

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Book Description

This paper develops an open-economy DSGE model with an optimizing banking sector to assess the role of capital flows, macro-financial linkages, and macroprudential policies in emerging Asia. The key result is that macro-prudential measures can usefully complement monetary policy. Countercyclical macroprudential polices can help reduce macroeconomic volatility and enhance welfare. The results also demonstrate the importance of capital flows and financial stability for business cycle fluctuations as well as the role of supply side financial accelerator effects in the amplification and propagation of shocks.



The Riskiness of Credit Allocation and Financial Stability

Author : Mr.Luis Brandao-Marques

Publisher : International Monetary Fund

Page : 39 pages

File Size : 42,25 MB

Release : 2019-09-27

Category : Business & Economics

ISBN : 151351377X

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Book Description

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson (2013)’s ISS indicator, helps predict downside risks to GDP growth and systemic banking crises, two to three years ahead. Our analysis indicates that the riskiness of credit allocation is both a measure of corporate vulnerability and of investor sentiment. Economic forecasters wrongly predict a positive association between the riskiness of credit allocation and future growth, suggesting a flawed expectations process.



How Important is the Global Financial Cycle? Evidence from Capital Flows

Author : Mr.Eugenio M Cerutti

Publisher : International Monetary Fund

Page : 67 pages

File Size : 20,74 MB

Release : 2017-09-01

Category : Business & Economics

ISBN : 1484316606

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Book Description

This study quantifies the importance of a Global Financial Cycle (GFCy) for capital flows. We use capital flow data dis-aggregated by direction and type between 1990Q1 and 2015Q5 for 85 countries, and conventional techniques, models and metrics. Since the GFCy is an unobservable concept, we use two methods to represent it: directly observable variables in center economies often linked to it, such as the VIX; and indirect manifestations, proxied by common dynamic factors extracted from actual capital flows. Our evidence seems mostly inconsistent with a significant and conspicuous GFCy; both methods combined rarely explain more than a quarter of the variation in capital flows. Succinctly, most variation in capital flows does not seem to be the result of common shocks nor stem from observables in a central country like the United States.



Capital Inflows, Credit Growth, and Financial Systems

Author : Ms.Deniz Igan

Publisher : International Monetary Fund

Page : 31 pages

File Size : 32,6 MB

Release : 2015-08-19

Category : Business & Economics

ISBN : 1513581260

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Book Description

Exploiting a granular panel dataset that breaks down capital inflows into FDI, portfolio and other categories, and distinguishes between credit to the household sector and to the corporate sector, we investigate the association between capital inflows and credit growth. We find that non-FDI capital inflows boost credit growth and increase the likelihood of credit booms in both household and corporate sectors. For household credit growth, the composition of capital inflows appears to be more important than financial system characteristics. In contrast, for corporate credit growth, both the composition and the financial system matter. Regardless of sectors and financial systems, net other inflows are always linked to rapid credit growth. Firm-level data corroborate these findings and hint at a causal link: net other inflows are related to more rapid credit growth for firms that rely more heavily on external financing. Further explorations on how capital flows translate into more credit indicate that both demand and supply side factors play a role.