Vulnerabilities in Central and Eastern Europe: Credit Growth
University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)
May 1, 2009
GATE Working Paper No. 09-12
In this work, we try to analyze the recent credit development in 11 Central and Eastern European countries and estimate the credit-to-GDP ratio equilibrium level using filtering methods and dynamic panel estimations. Our estimation findings corroborate previous fears about the rapid credit growth in the CEECs. Indeed, in many cases the credit expansion exceeds the level justified by their fundamentals or financial development. Under normal conditions, this rapid growth and even "overshooting" of banking credit could be considered as an adjustment to its long-term equilibrium level. However, in the actual crisis situation, this excessive credit growth can reinforce other existing disequilibria and lead to an increase in the financial vulnerability of these countries.
Number of Pages in PDF File: 30
Keywords: Bank Credit Growth, Dynamic Panel, CEECs
JEL Classification: C2, G21working papers series
Date posted: May 17, 2009 ; Last revised: April 15, 2011
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